2. Find the value of the annuity and the interest. Round to the nearest dollar.
Periodic Deposit: $1000 at the end of each year
Rate:6.5% compounded annually
Time:9 years
A. $11,732; $2,732
B. $2,546; $6,454
C. $27,116; $18,116
D. $10,077; $1,077
3. a.Use the appropriate formula to determine the periodic deposit.
b.How much of the financial goal comes from deposits and how much comes from interest?
Periodic Deposit
Rate
Time
Financial Goal
$? at the end of every three months
4.5%
compounded quarterly
5
years
$30,000
a.
The periodic deposit is $.
(Do not round until the final answer. Then round up to the nearest dollar as needed.)
b.
$of the $30,000 comes from deposits and
$comes from interest.
(Use the answer from part (a) to find these answers. Round to the nearest dollar as needed.)
4. At the age of 33, to save for retirement, you decide to deposit $60 at the end of each month in an IRA that pays
3.5% compounded monthly.
a.
Use the following formula to determine how much you will have in the IRA when you retire at age 65.
B.
Find the interest.
a.
You will have approximately $in the IRA when you retire.
(Do not round until the final answer. Then round to the nearest dollar as needed.)
b.
The interest is approximately $.
(Use the answer from part a to find this answer. Round to the nearest dollar asneeded.)
5. a. Use the appropriate formula to determine the periodic deposit.
b. How much of the financial goal comes from deposits and how much comes from interest?
Periodic Deposit
Rate
Time
Financial Goal
$? at the end of each year
6%
compounded annually
19
years
$130,000
a.The periodic deposit is
$.
(Do not round until the final answer. Then round up to the nearest dollar as needed.)
b.
$of the $130,000 comes from deposits and
$ comes from interest.
(Use the answer from part (a) to find these answers. Round to the nearest dollar as needed.)
7.. Suppose that you borrow $10,000 for four years at 6% toward the purchase of a car. Find the monthly payments and the total interest for the loan.
A. $235; $11,280
B. $235; $1,280
C. $553; $16,544
D. $276; $13,248
8. Suppose that you decide to buy a car for $25,738, including taxes and license fees. You saved $7,000 for a down payment and can get a five-year loan at 6.57%. Find the monthly payment and the total interest for the loan.
A. $367 ; $3,282
B. $367; $19,782
C. $642; $19,782
D. $504; $4,502
9. Suppose that a certain car has the following average operating and ownership costs.
Average Costs per Mile
Operating
Ownership
Total
$0.26
$0.68
$0.94
a. If you drive 20,000 miles per year, what is total annual expense for this car?
b. If the total annual expense for this car is deposited at the end of each year into an IRA paying 8.5% compounded yearly, how much will be saved at the end of four years?
a. If you drive 20,000 miles per year, the total annual expense for this car is $.
(Round to the nearest dollar as needed.)
b. If the total annual expense for this car is deposited at the end of each year into an IRA paying 8.5% compounded yearly, the amount saved at the end of four years is
$.
(Round to the nearest dollar as needed.)
10. The biggest single purchase that most people make in their lives is the purchase of a home. Most home owners have to finance the purchase with an installment loan. Assume you have found your new home and it costs $325,000. You need to have a 10% down payment.
Determine the 10% down payment and the amount of the mortgage loan. Assume any other costs will be taken care of at settlement and not incorporated into the loan.
The down payment is $ and the mortgage loan amount is
$.
(Round to the nearest cent as needed.)
11. Use PMT to determine the regular payment amount, rounded to the nearest dollar. The price of a home is $163,000. The bank requires a 20% down payment and three points at the time of closing. The cost of the home is financed with a 30-year fixed-rate mortgage at 7.5%. Complete parts (a) through (e) below.
a. Find the required down payment.
$
b. Find the amount of the mortgage.
$
c. How much must be paid for the three points at closing?
$
(Round to the nearest dollar as needed.)
d. Find the monthly payment (excluding escrowed taxes and insurance).
$
(Round to the nearest dollar as needed.)
e. Find the total cost of interest over 30 years.
$
(Round to the nearest dollar as needed.)
12. In terms of paying less in interest, which is more economical for a $130,000 mortgage: a 30-year fixed-rate at 9% or a 15-year fixed-rate at 8.5%? How much is saved in interest? Use the following formula to determine the regular payment amount.
Determine which loan is more economical. Choose the correct answer below.
a. The 15-year8.5% loan is more economical.
b. The 30-year9% loan is more economical.
The buyer will save in interest approximately $
(Do not round until the final answer. Then round to the nearest thousand dollars.)
13. Use PMT to determine the regular payment amount, rounded to the nearest cent. The cost of a home is financed with a
$160,000 20-year fixed-rate mortgage at 4.5%.
a. Find the monthly payments and the total interest for the loan.
b. Prepare a loan amortization schedule for the first three months of the mortgage.
a. The monthly payment is $
(Do not round until the final answer. Then round to the nearest cent as needed.)
The total interest for the loan is $
(Use the answer from part a to find this answer. Round to the nearest cent as needed.)
b. Fill out the loan amortization schedule for the first three months of the mortgage below.
Payment Number
Interest
Principal
Loan Balance
1
$
$
$
2
$
$
$
3
$
$
$
(Use the answer from part a to find these answers. Round to the nearest cent as needed.)
14. Use PMT to determine the regular payment amount, rounded to the nearest dollar. Your credit card has a balance of $3200 and an annual interest rate of 15%. You decide to pay off the balance over three years. If there are no further purchases charged to the card,
a. How much must you pay each month?
b. How much total interest will you pay?
a.The monthly payments are approximately $
(Do not round until the final answer. Then round to the nearest dollar as needed.)
b. The total interest paid over 3 years is approximately
$
(Round to the nearest dollar as needed.)
15.
Suppose your credit card has a balance of $7,000 and an annual interest rate of 16%. You decide to pay off the balance over three years. If there are no further purchases charged to the card,
(a) How much must you pay each month?
(b) How much total interest will you pay?
Now suppose decide to pay off the balance over one year rather than three.
(c) How much more must you pay each month?
(d) How much less will you pay in total interest?
A. (a)$246 (b)$1,856 (c)$389 more per month (d)$1,236 less in total interest
B. (a)$257 (b)$752 (c)$389 more per month; (d)$1,500 less in total interest
C. (a)$246 (b)$620 (c)$389 more per month (d)$1,236 less in total interest
D. (a)$257 (b)$2,252 (c)$389 more per month; (d)$1,500 less in total interest
16. A credit card has a monthly rate of 1.7% and uses the average daily balance method for calculating interest. Here are some of the details in the June 1-June 30 itemized billing:
June 1 Unpaid Balance:$450.59Payment Received June 7:
$140
Purchases Charged to the Account:$252.12
Average Daily Balance:$338.59
Last Day of the Billing Period: June 30
Payment Due Date: July 9
a. Find the interest due on the payment due date.
b. Find the total balance owed on the last day of the billing period.
c. Minimum payment terms are shown in the accompanying table. What is the minimum payment due by July 9?
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