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Assignment 7 |
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Assignment 7 |
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1. Assuming that interest compounds annually, find the balance for each of the following cases.
a. $2,000 is invested at an APR of 3% for 10 years.
b. $10,000 is invested at an APR of 5% for 20 years.
d. $30,000 is invested at an APR of 7% for 25 years.
2. How long will it take your money to double at an APR of 5% compounded annually?
3. Suppose that you deposit $600 in a bank that offers an APR of 5.5% compounded monthly.
a. What is your account balance after one year?
b. What is your
account balance after 10 years?
c. What is the
annual percentage yield for this account?
4. Suppose that you deposit $925 in a bank that offers an APR of 8.25% compounded quarterly.
a. What is your account balance after one year?
b. What is your
account balance after 10 years?
c. What is the
annual percentage yield for this account?
5. How long will it take your money to double at an APR of 7% compounded annually?
6. You are interested in buying a new home that costs $280,000. The mortgage company requires a down payment of 15% of the cost of the home. You will borrow the rest. The mortgage company offers you 2 options. Option 1 is a 15 year loan with an APR of 5.75% and option 2 is a 30 year loan with an APR of 6.5%.
a. For each option, find the monthly mortgage payment, the total amount paid back and the total amount of interest paid. Write these in your Word document.
b. Which option would you choose and why?
7. You make a purchase for $3,000 on your credit card which has an annual interest rate of 18%. If you pay the minimum payment of 2% per month (not less than $25), what is your balance after 10 years, assuming you make no other purchases with your credit card?
8. You make a purchase for $1,500 on your credit card which has an annual interest rate of 16%. The credit card company offers a minimum payment of 3% per month (not less than $25). About how many years will it take you to pay off your credit card?
