Senior Seminar - Finance Assignment

This will be graded in a brief individual interview with each student. Some of this assignment is amenable to spreadsheet, some is simply brief notes. You should be in a position to show me notes and perhaps one or two spreadsheets and be able to discuss. [No MSWord. No fancy covers. No vellum paper. Just let me know you know what you are doing.]

See me for an interview.

Refer to info on the use of the finance features of Excel or Quattro. For Quattro, understand @Paymt, @PPaymt, @IPaymt and @FV. Corresponding functions for Excel are @PMT, @PPMT, @IPMT and @FV.

#1. Assume you are employed at \$55,000 per year. Consider such deductions as social security, income taxes (federal, state and county) and perhaps a portion of your payment on health benefits. Do the best you can to come to grips with what is a realistic monthly "take home pay".

#2. Develop a projection of monthly expenses; food, clothing, housing, cost of an automobile (the car itself), auto insurance, gasoline, utilities, etc.

#3. Use Excel to determine;

A. The monthly payment on a \$10,000 automobile (for the car itself). Lacking any better information, assume 6.5% over 36 months.

B. Similarly, determine the same for a \$30,000 auto.

C. In the area of Morgan, \$750 per month buys an adequate apartment. I assume, even with this \$750, you could still swing the \$30,000 auto in B. above.

However, if you go for option A and take the savings between B. and A., you have that much more (than the \$750 you would have to pay for an apartment) that you could use to purchase a modest home.

Use Excel to determine how much house you could buy with \$500 + (B-A). Lacking any better info, use 7.0 percent over a period of 360 months. (Ignore real estate taxes. I will explain why in class).

#4. Select any car you would like to buy.

A. Assume you put no money down. Calculate the monthly payment. Also, develop a table of payments showing the principle and interest per period over a period of 36 months, 6.5% interest. Sum the interest costs over the life of the loan.

B. Assume, as an alternative, you decide to wait for a year, and that you sock away whatever monthly payment you would be paying on this honey of a car into an interest bearing savings account, or small certificates of deposit paying 5.0 percent / 12 per month. At the end of the year, you have a down payment. Use the @FV function to determine this value.

C. Now, patting yourself on the back for your self restraint over the year, you carry this down payment down and buy the same car (except it is a year later). Assume the same terms, 36 months, 6.5% interest. Again, calculate the monthly payment. Develop a table of payments showing the principle and interest per period over a period of 36 months, 6.5% interest. Sum the interest costs over the life of the loan.

How much extra "luxury income" do you have per month as a benefit of your self restraint. Compare the interest costs over the life of the two loans.