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York University (35,583)
Lecture

# Lecture3

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Chris Robinson

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Continuation : Chapter 3 1. C 2. 80,000 for house that requires downpayment of 100,000 in 5 years. Inflation is a problem Answer: B 3. Answer: 4. A 5. Constant growth annuity : none of the above Detailed problems: 1. Assume PV 1500,000 , N = 30, I = 3%, then PMT 76528 What he gets is FV = 1500,000, PMT =- 5000, I = 10% , compute PV = 822, 470 What can he do to fix this: - Change goal : he can change his amount say instead of 76000 a year, change to about 36000- 40000. ( eat less later) Or he can change his time of retirement : FV 1500,000 , I = 10%, PMT -5000, you get 36.1 years. Note : that you’d have to work a few more years( 6.1 years plus) and so, you’d lower your expenses post retirement . - Money down now: FV 1500,000 PMT- 5000, I = 10, n = 30 , you get PV = 38828 - Larger payments : save more now ( eat less now ). / work harder ( work overtime) FV 1500,000, I = 10, n=30, your payment would be -9118 per year - Riskier investments : FV 1500,000 PMT -5000, I= 10%, n = 30 , youre interest would be 13.12%. Note: there is a problem: what to invest in to get that return 2. Answers: a. \$1989 b. \$18122 c. 0-------------------------------------5-------------------------------------------------------------------15 0 10,000
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