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Answer ALL Questions

By December 20, 2021No Comments

Answer ALL QuestionsQuestion 1(a)John is a 20-yesrs old young man who is working hard to buy his first house whenhe is 45.His potential dream house is around $200,000 now but inflation willincrease its price.He is willing to invest a fixed amount at the end of each year forthe next 25 years for his dream.Assume he can earn 9%annually after taxes on hisinvestments.Required:(①)Expected inflation is to be around5%per year for the next25 years.What will thehouse cost when John is 45?(2 marks)(ii)How much should John invest at the end of each of the next 25 years to haveenough cash to purchase the house when reaches to 45?(4marks)(iii)If John invests at the beginning instead of at the end of each of the next 25 years,how much should he invest each year?(4 marks)(b)Lucy borrowed S18,000 business loan from her bank that is to be repaid in threeequal,annual,end-of-year payments.The interest rate on the loan is 10%.Required:(①)What is Lucy’s annual loan payment?(3 marks)(ii)Construct an amortization schedule for the loan.(12 marks)ITotal:25Marks]

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