What rate of interest must your investment earn to pay the cost of a four-year college education for...

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1. On September 1, 1998, Susan Chao bought a motorcycle for $10,000. She paid $1,000 down and financed the balance with a five-year loan at a stated annual interest rate of 9.6 percent, compounded monthly. She started the monthly payment exactly one month after the purchase, i.e., October, 1998. In the middle of October, 2000, she got a new job and decided to pay off the loan. If the bank charges her 1 percent prepayment penalty based on the loan balance, how much should she pay the bank on November 1, 2000? 2. Assume that the cost of a college education will be $20,000 per year when your child enters college 12 years from now. You currently have $10,000 to invest. What rate of interest must your investment earn to pay the cost of a four-year college education for your child? For simplicity, assume the entire cost of the college education must be paid when your child enters college. Jul 08 2014 07:35 AM

 

Solution ID:608931 | This paper was updated on 26-Nov-2015

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