Assignment 7 Savings Accounts & Loans

1.  You put $600 in a savings account with an APR of 4.2% that compounds monthly.  Assume you do not make any other deposits or withdrawals

    a.  How much money is in the account after 3 years?  Either copy and paste your table or show your calculation.

     b.  What is the annual percentage yield for this account? (Recall that the annual percentage yield is the percentage change in the account for one year, in this case in 12 months.)

2.  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?

3.  How long will it take your money to double at an annual percentage rate of 10% compounded annually?

4. Assume you are currently 18 years old and plan to retire at 65.  You deposit $3000 in a saving account that compounds annually with an APR of 8.3%.  How much money will you have when you retire (assuming you make no other deposits or withdrawals)?

5. Suppose you start saving today for a $3,000 down payment on a car that you plan to purchase in 5 years. Assume you make no deposits into the account after your initial deposit.  In order to reach your $3,000 goal, how much will you need to deposit today?  Assume this account compounds annually with an annual percentage rate of 6%.

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 6.0%.  

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?