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Time Value Of Money

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Exeter Inc. Has $75,000 invested in securities that earn a return of 16% compounded quarterly. The company is developing a new product that it plans to launch in two years at a cost of $500,000. Setter’s cash flow is good now but may not be later, so management would like to bank money from now until the launch to be sure of having the $500,000 in hand at that time.

The money currently invested in securities can be used to provide part of the launch fund.

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Setter’s bank has offered an account that will pay 12% compounded monthly. How much should Exeter deposit with the bank each month to have enough reserved for the product launch? 2. A family plans to buy a new house in the next three years from now for Baht by applying for a 25-years mortgage loan at the time of purchase. However, banks generally will lend the amount of money at the 40% of the gross family income.

The family expects that their gross income will be 40,000 Baht per month at the time they buy a house.

So, the mortgage loan will not provide enough money to buy a house and the family will need to have a down payment to make up the difference. If the family has already saved 100,000 Baht in the bank account with 6% pa quarterly compounding return, how much money do they need to deposit each month so that they have enough money for a down payment?

Cite this Time Value Of Money

Time Value Of Money. (2018, Jun 02). Retrieved from https://graduateway.com/time-value-of-money/

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