Kevin Finnegan, CPA, has just billed a customer $35,000 for services rendered. The customer wants to pay for this bill by making monthly payments over the next three years.
A. Determine the amount of the customer’s monthly payments if Kevin wants an 6 percent annual return on the loan.
B. Determine the amount of the customer’s monthly payments if Kevin wants a 7 percent annual return on the loan.
C. Assume Kevin wants an 6 percent return, but the customer wants to make quarterly payments over the next three years. Determine the amount of the payment that Kevin would find acceptable in this situation.
Jeff Johnson wants to have $2,000,000 in his retirement account when he retires on his 65th birthday. He is 24 today and will make annual payments once he starts paying into the retirement fund. How much will Jeff have to pay monthly to achieve his goal if he can get an 8 percent annual rate of interest and he starts payments at:
A. Age 25?
B. Age 35?
C. Age 45?
D. What is the moral of this story?
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