Problem 1. Tanya's balance on a student loans is $24,000 today (first day of month). The rate on the loan is 6% NAR with monthly compounding.
a. Tanya would like to payoff the loan in three years. The first payment would be at the end of the present month. What equal end-of-month payments would she have to make to do this?
b. Alternatively, Tanya could borrow $24,000 at 4.0% NAR but with weekly compounding and use this to pay off the student loan today. This loan requires an upfront application fee of $1,000 that will be added to the loan amount. The first monthly payment would be at the end of this month. What would the equal end-of-month payments be on this loan if it was paid off in three years?
Problem 2. Mike is retiring this year and has a $400,000 retirement fund to draw from that has an NAR of 2.25% compounded monthly.
a. If Mike plans to withdraw $2,000 at the end of each month, how many years would it last?
b. How many years will the fund last if Mike withdraws $100,000 up front to pay for a retirement condominium, wants $30,000 in the account at the end, and withdraws $1,500 at the beginning of each month.
Problem 3. Linear, LLC had sales and costs last year as shown below.
a. What was the profit last year?
b. What is the break even quantity?
c. If the price, fixed cost and the variable cost per unit stay the same as last year, what will the quantity sold have to be this year to increase profits to $500,000?
d. If the sales quantity, price, and fixed cost stay the same as last year, what would the unit variable cost need to be this year to increase profits to $500,000?
Sold units 40,000
Total Revenue $2,500,000
Total Variable cost $1,500,000
Total Fixed Cost $600,000