The assignments that say "Preview, you dont have to show the work
there are some with answers at the bottom but they still need work shown,
For problem #1, do one Compounded Annually, one Semi-Annually, one Quarterly. For part j, choose 3 to do for Compounded Continuously,
1 MATH 131 TEST 3 NAME: ______________ SHOW SET-UP!! DATE: _______________ American General offers a 17-year annuity with a guaranteed rate of 7.30% compounded semi-annually. How much should you pay for one of these annuities if you want to receive payments of $800 semi-annually over the 17 year period? PV = _____________________ E-Loan, an online lending service, recently offered 48-month auto loans at 3.6% compounded monthly to applicants with good credit ratings. If you have a good credit rating and can afford monthly payments of $289, how much can you borrow from E-Loan? PV = ______________________ What is the total interest you will pay for this loan? ______________ 2 Your credit card company agrees to lower the annual interest rate to 1.8% for you. If a payment of $200.00 is made each month, how many months will it take to pay off an unpaid balance of $10,590.67? (Round up to the next month.) No new purchases can be made with the credit card. (Assume the interest rate is compounded monthly.) The number of months (nt) is _______ You want to purchase an automobile for $35,400. The dealer offers you 0% financing for 72 months or a $3000 rebate. You can obtain financing for 72 months at 4.2% cm from Port Charles Federal Bank. Which option should you choose? Monthly payment from Dealer = ________ Monthly payment from Bank = _________ Which do you choose? ______ How much would you save each month? _______ 3 Ridge Forrester has a $433,500, 30-year mortgage at 5.4% compounded monthly. Find the monthly payment. Also find the unpaid balance after 10 years. Monthly payment = ____________ Unpaid balance after 10 years = ____________ |----------|----------|----------| After 10 years Ridge Forrester decides to refinance at 1.5% compounded monthly using the same monthly payment. How many years will it take him to pay off the mortgage. Use the PMT from the above problem. It will take ________years (round to 1 decimal place) Extra Credit: How much interest did he save by refinancing? _____________ 4 A sailboat costs $54,000. You pay 10% down and amortize the rest with equal monthly payments over a 15-year period. If you must pay 4.5% compounded monthly, what is your monthly payment? How much interest will you pay? Monthly payments: ______________ Total Interest paid: _____________ Amortization Table: PMT = $700 per month, r = 2.7% cm, AF = $63,000 Principal Payment Interest Reduce Principal New Principal 1 $63,000 $700 2 $700 3 $700 I1 = ____________ I2 = ____________ I3 = ____________ 5 Beth has just received an inheritance of $500,000 and would like to be able to make quarterly withdrawals over the next 20 years. She decides on an annuity that pays 6.4%, compounded quarterly. How much will her quarterly payments be to draw the account down to zero at the end of 20 years? Quarterly Payments = ____________ You want to set up an education account for your child and would like to have $175,000 after 18 years. You find an account that pays 5.4% interest, compounded semiannually, and you would like to deposit money in the account every six months. How large must each deposit be to reach your goal? Semi-annual Payments = _____________ How much interest did you earn? ______________ Your child (in the above problem) is now 18 years old and is planning to go away to college. How much can she withdraw each month for 5 years for her college expenses, if the College Bank pays 5.7% cm? Monthly Payments = _____________ 6 To accumulate enough money for a down payment on a home, a couple deposits $400 per month into an account paying 6.3% compounded monthly. How much money will be in the account in 5 years? How much interest will they earn on their savings? Amount in account after 5 years is ______________ Interest earned is _________________ A person wishes to have $300,000 in an account for retirement 25 years from now. How much money should be deposited quarterly in an account paying 8% compounded quarterly? Note: Sometimes this is called a “sinking fund”. Quarterly Payments are ________________ How much interest did they earn? ______________________ 7 You plan to retire in 30 years, and you want to save up to buy a condo in a Senior Retirement Village in Florida. You can afford to deposit $250 each month at Pine Valley National Bank at 7.2% compounded monthly. How much will you have in 30 years and how much interest did you earn? Amount in 30 years = _____________ Interest earned = ______________ You want to have $350,000 when you retire. The interest rate is 5.7% compounded monthly. If you can afford $400 per month, how many months will it take you and how many years is that? How many monthly payments? __________ (round up to next month) How many years is that? _____________ (round to 1 decimal) 8 You have $700,000 in your 401K and plan to withdraw $5000 each month. How many years will the money last, if the interest rate is 5.4%? It will last _______ years (round to 1 decimal place) In the above problem, if you can afford to live on $3000 each month instead, how many years will the money last? It will last _______years (round to 1 decimal place) Extra Credit: You are 30 years old and plan to retire in 35 year and want to have $700,000 in your retirement fund. Your bank offers 6% cm. What are your monthly deposits? PMT = _________ You are now 65 years old and ready to retire with $700,000 and want to withdraw $4000 per month. The bank still offers you 6% cm. How long will your retirement fund last? Number of months (nt) = __________ (round up to next month) Number of years (t) = ____________ (round to tenths)