Kyle has recently received an inheritance, and is considering paying off the loan on his car with one lump sum payment. The loan requires a payment of $550 per month and there are 36 payments left. The interest rate under the loan is 6% APR. To pay off the loan, he will also have to pay an admin fee equal to 2% of the loan outstanding. How much money does he need to pay off the loan? Suppose instead that the loan interest rate is 6% p.a. semi-annual compounding. How much money will he need?
Sam is now 30 years old. He has a job that pays him $60,000/year. He plans to work until he is 60 years old. The wage increases at the rate of 2% p.a. The job is quite stable and he believes that the proper discount rate is 3% p.a. He currently has no investment and no debt. He is considering going back to school to get a master's degree. The program will take two full-time years (i.e., he will need to take two years off from work) and costs $70,000 up front. Assume that after he graduates, the wage growth rate and the interest rate are the same as above. What is the minimum starting level of salary that he will have to get in order for the degree to be worth it?