An investor wants to determine how much interest he must earn to be able to make the payments on a 10-year mortgage which has increasing annual payments. The problem is summarized in the accompanying spreadsheet. The investor has enough money to make an initial investment of $9,000 and hopes he can earn 12%, compounded quarterly, on his investments. He would like to know how low his annual return can be and still allow him to make his payments from interest income. What constraint must be entered in the Risk Solver Platform (RSP) task pane?
A) $D$7:$D$16  $E$7:$E$16
B) $C$7:$D$16  $E$7:$E$16
C) $C$7:$C$16  $E$7:$E$16
D) $D$7:$D$16  $E$7:$E$16

Question

An investor wants to determine how much interest he must earn to be able to make the payments on a 10-year mortgage which has increasing annual payments. The problem is summarized in the accompanying spreadsheet. The investor has enough money to make an initial investment of $9,000 and hopes he can earn 12%, compounded quarterly, on his investments. He would like to know how low his annual return can be and still allow him to make his payments from interest income. What constraint must be entered in the Risk Solver Platform (RSP) task pane? 
A) $D$7:$D$16  $E$7:$E$16 
B) $C$7:$D$16  $E$7:$E$16 
C) $C$7:$C$16  $E$7:$E$16 
D) $D$7:$D$16  $E$7:$E$16

Quizplus · Accepted Answer

The constraint for this problem must ensure that the investor is able to make the increasing annual mortgage payments using only the interest earned from his investments. In other words, the sum of the interest earned in each year (from cells D7 to D16) must be greater than or equal to the corresponding mortgage payment (from cells E7 to E16) for each year. Therefore, the correct constraint is $D$7:$D$16 F1F1F1S1F1F1F10 $E$7:$E$16, which means the sum of the interest earned is greater than or equal to the mortgage payments for each year. Therefore, option D is the best choice.

An Investor Wants to Determine How Much Interest He Must