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Evaluate antique car offer; interest compounding

1. The owner of an antique car, priced at ?50.000, wants to sell it and receives the following offers:

a) ?5.000 at the moment of the sale and the rest in 6 equal payments at the end of every two months of ? 8.169,75 each.

b) 12 monthly payments of ? 4.897,20, starting the first one at the moment of the sale.

Which offer is best for the owner, taking into account an interest rate on the market of 7%?

2. Nicolas is offered the following conditions on a savings/investment account: during the first year, the money he deposits will earn a 6.5% compound interest paid monthly. The second year, the interest rate will go up to 7% but interest will be
paid quarterly and, finally, during the third year, interest rate will be 7.5% where interest are paid twice a year. How much money would Nicolas have after 3 years if he deposits 25,000? at the beginning?

3. What type of credit card would you prefer:

a) One that charges you a 11% annual interest rate compound monthly, or
b) One that charges you a 11.5% annual interest rate compound every two months.

4. How much money will it be available on an investment fund if monthly deposits of ?500 are made, at the beginning of each period, during 20 years? Assume the annual return of the fund is 9%.

Solution Summary

Detailed solution in attached excel file.