1025 More work with annuities, mortgages, etc

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10/25 More work with annuities, mortgages,
etc Simple interest Compound
interest Present value effective rate
Annuity Present value of annuity
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Common 2 Matt won a prize in the lottery of
4000, payable 2000 immediately and 2000 plus
7 simple interest payable in 250 days. Getting
impatient, Matt sells the promissory note to
Nancy for 1960 cash after 130 days. Using a
nominal 360 day year, find the simple interest
rate, rounded to .01, earned by Nancy.
3
Common 2 You plan on taking a 4 year hiatus to
relax. If you plan on making monthly withdrawals
of 2900 from a money market account that pays
4.30 compounded monthly to finance your
inactivity, how much must you invest at the
outset to be able to afford this?
4
Common 3 If you can afford a monthly payment of
870 for 32 years and if the available interest
rate is 4.80, what is the maximum amount that
you can afford to borrow?
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Common 4 You plan on buying equipment worth
24000 dollars in 2 years. Since you firmly
believe in not borrowing, you plan on making
bi-weekly payments into an account that pays
4.20 compounded bi-weekly . How much must your
payment be?
6
Bank A is offering an interest rate of 6.80
compounded monthly, while bank B is offering an
interest rate of 6.77 compounded quarterly.
Which bank offers the better effective rate?
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Common 10 A company contributes 160 per month
into a retirement fund paying 5.20 compounded
monthly and employees are permitted to invest up
to 2300 per year into another retirement fund
which pays 5.20 compounded annually. How large
can the combined retirement fund be worth in 26
years?
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Common 11 If you finance 132000 of the purchase
of your new home at 5.10 compounded monthly for
17 years, how much would the monthly payment be?
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Common 12 If you finance 50000 of the purchase
of your new home at 4.40 compounded monthly for
15 years, the monthly payment will be 379.95.
If instead your had a rate of 5.40 compounded
monthly for 10 years, the monthly payment will
be 540.16. How much do you pay in total for the
50000 mortgage if you finance it for 15
years? How much do you save (in total payments)
if you finance for 10 years instead?