About Accounting Questions

2013-11-23 11:06 pm

There are two questions. I don't know how to answers.

1. You are saving to buy a new car in three years. You have decided that at the end of each year from today, you would place 10% of your annual salary in a bank account. This account will earn 8% interest per year. Your annual salary is $400,000 at present and will grow at 4% per annum. How much money will you save in three years?

2. Mr. Chan plans an investment project of purchasing a yacht at a price of $900,000 eight years later. The yacht will be rented out as to earn returns. His investment may be financed in the following ways:

He borrows a bank loan of $600,000 to purchase the yacht which is sold at $610,000 now. The loan is charged at a compound interest rate of 5% per annum. The loan will be repaid by eight annual equal payments. The first payment will be made one year from now. What are the annual payments and the total interest charged?

Explain and answers my question. Thank you so much!!!

回答 (1)

七瀨遙

2013-11-23 11:44 pm

✔ 最佳答案

1.
The annual salary 1 year from now: 400000 x 1.04 = $ 416000
The annual salary 2 years from now: 400000 x 1.04^2 = $ 432640
The annual salary 3 years from now: 400000 x 1.04^3 = $ 449945.6

Amount in bank account 1 year from now: 416000 x 0.1 = $ 41600
Amount in bank account 2 years from now: 416000 x 0.1 x 1.08 + 432640 x 0.1 = $ 88192
Amount in bank account 3 years from now: 416000 x 0.1 x 1.08^2 + 432640 x 0.1 x 1.08 + 449945.6 x 0.1 = $ 140242, correct to the nearest dollar

*Draw a timeline to help yourself before doing the question.

2.
The total amount of payment over the 8 years: 600000 x 1.05^8 = $ 886473, correct to the nearest dollar

Annual payment: 886473 / 8 = $ 110809, correct to the nearest dollar

Total interest charged: 886473 - 600000 = $ 286473

*Annual ''payment'' here includes both the interest and principal. And the calculation would be a bit different from that of ''repayment'' of loan including the principal only.

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