Question #5

Salary 40000 growth rat 5% growth rate 30 20

discount 8% savings 5% Savings Gro 8%
Age salary years Discount PV of CF savings savings balance
31 40000 1 0.925926 37037.037 2000 2000
32 42000 2 0.857339 36008.2305 2100 4260
33 44100 3 0.793832 35008.0018 2205 6805.8
34 46305 4 0.73503 34035.5573 2315.25 9665.514
35 48620.25 5 0.680583 33090.1252 2431.013 12869.77
36 51051.26 6 0.63017 32170.955 2552.563 16451.91
37 53603.83 7 0.58349 31277.3174 2680.191 20448.26
38 56284.02 8 0.540269 30408.503 2814.201 24898.32
39 59098.22 9 0.500249 29563.8224 2954.911 29845.09
40 62053.13 10 0.463193 28742.6051 3102.656 35335.36
41 65155.79 11 0.428883 27944.1994 3257.789 41419.98
42 68413.57 12 0.397114 27167.9716 3420.679 48154.25
43 71834.25 13 0.367698 26413.3058 3591.713 55598.31
44 75425.97 14 0.340461 25679.6028 3771.298 63817.47
45 79197.26 15 0.315242 24966.2805 3959.863 72882.73
46 83157.13 16 0.29189 24272.7727 4157.856 82871.2
47 87314.98 17 0.270269 23598.529 4365.749 93866.65
48 91680.73 18 0.250249 22943.0143 4584.037 105960
49 96264.77 19 0.231712 22305.7084 4813.238 119250.1
50 101078 20 0.214548 21686.1054 5053.9 133844
51 106131.9 21 0.198656 21083.7136 5306.595 149858.1
52 111438.5 22 0.183941 20498.0549 5571.925 167418.6
53 117010.4 23 0.170315 19928.6644 5850.521 186662.7
54 122861 24 0.157699 19375.0904 6143.048 207738.7
55 129004 25 0.146018 18836.8935 6450.2 230808
56 135454.2 26 0.135202 18313.6464 6772.71 256045.4
57 142226.9 27 0.125187 17804.934 7111.345 283640.3
58 149338.3 28 0.115914 17310.3525 7466.913 313798.5
59 156805.2 29 0.107328 16829.5094 7840.258 346742.6
60 164645.4 30 0.099377 16362.023 8232.271 382714.3

a. PV of CF 760,662.53
b. savings at end of 30 years 382,714.30
c. 20 year annual payout of savings -38,980.30
 Question #11
Cost of Car -10000

Kangaroo Autos Turtle Motors

Down $1,000 Discount $1,000
payment $300 monthly rate 0.83%
term in months 30 term in months 30
principal ($9,000) principal ($9,000)

monthly payment $340.14

out of pocket $1,000 interest paid $1,204.06

Kangaroo autos is the better deal because the 'finance charge' is

the amount down or $1000, while Turtle Motors' finance charge is the
$1204.06 that is paid in interest over the life of the loan.