Reference no: EM132769527
1. Bridget Jones has a contract in which she will receive the following payments for the next five years: $1,000, $2,000, $3,000, $4,000, $5,000. She will then receive an annuity of $8,500 a year from the end of the sixth year through the end of the fifteenth year. The appropriate discount rate is 14 percent. If she is offered a buyout of the contract for $30,000, should she do it?
2. Jim Thomas borrows $70,000 at 12 percent interest toward the purchase of a home. His mortgage is for 30 years.
a. How much will his annual payments be? (Although home payments are usually on a monthly basis, we shall do our analysis on an annual basis for ease of computation. We get a reasonably accurate answer.)
b. How much interest will he pay over the life of the loan?
c. How much should he be willing to pay to get out of a 12 percent mortgage and into a 10 percent mortgage with 30 years remaining on the mortgage? Assume current interest rates are 10 percent. Carefully consider the time value of money. Disregard taxes.
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What annual contributions to the retirement fund
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How much will his annual payments be
: Bridget Jones has a contract in which she will receive the following payments for the next five years: $1,000, $2,000, $3,000, $4,000, $5,000
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