Business Mathematics
Not what you're looking for?
One real estate sales technique is to encourage customers or clients to buy today because the value of the property will probably increases during the next few years. "Buy this lot today for $28,000. In two years, I will project it will sell for $32,500. "The buyer has a CD worth $30,000 now, which earns 4% compounded annually and will mature in 2 years. Cashing in the CD now requires the buyer to pay an early withdrawal penalty of $600.
a) Should the buyer purchase the land now or in two years?
b) What are some of the problems with waiting to buy land?
c) What are some of the advantages of waiting?
d) Lots in a new subdivision sell for $15,600. Assuming that the price of the lot does not increase, how much would you need to invest today at 8% compounded quarterly to buy the lot in one year?
e) I have inherited $60,000 and plan to buy a home. If you invest the $60,000 today at 5%, compounded annually, how much could you spend on the house in one year?
f) If you intend to spend $60,000 on a house in one year, how much of your inheritance should you invest today at 5%, compounded annually? How much do you have left to spend on a car?
Purchase this Solution
Solution Summary
This solution is comprised of detailed explanation and step-by-step calculation of the given problems and provides students with a clear perspective of the underlying concepts.
Solution Preview
Dear student, please refer to the attachment for the solutions. Thank You.
Solution (a),( b) and (c):
The buyer has a C.D. worth $30000
If, he wants to buy the land now, he will have to cash the C.D. and will eventually have to pay $600 as penalty. So, he will have $(30000-600) = $29400
The present value of the land is $28000, which is lesser.
So, if the buyer buys the land today, he will be left with $29400-$28000 = $1400
If he wishes to ...
Education
- MSc, Osmania University
- MSc, Indian Institute of Technology - Roorkee (I.I.T.-ROORKEE)
- BSc, Banaras Hindu University
Recent Feedback
- "Very fast turnaround. Excellent communication! Much appreciated!"
- "excellent"
- "excellent"
- "excellent work"
- "Fantastic..great solution and very well explained!!!!"
Purchase this Solution
Free BrainMass Quizzes
Motivation
This tests some key elements of major motivation theories.
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Income Streams
In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.