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.
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/