[Solution]Future Value Problems

After-class Task #4 Future Value Problems You are saving for a down payment on a house costing $150,000. You believe you will need a 10%…

After-class Task #4
Future Value Problems

You are saving for a down payment on a house costing $150,000. You believe you will need a 10% down payment.  If you put $12,000 in a bank account today earning 5% interest, will you have enough money for the down payment in 5 years?

 

You are evaluating the Jackson Company’s stock performance. It has shown an average increase of dividends of 4% per year.  Last year’s dividend was $5.50.  What will the dividend be in 5 years?

 
 

You have your eyes on a new Lexus, luxury cars by Toyota which are rated by car magazines as better than Mercedes but which currently sell for only $60,000 (a comparable Mercedes is $80,000). You would like to purchase one, but because you are in school that seems out of the question.  To make matters worse, you think that Lexus will increase its price as consumers recognize its quality.  If you believe that Lexus will increase its price by 3% per year, how much will the car cost in 10 years when you are ready to buy?

 

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