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Compound amount
2) (a) find the simple interest of 60,000 for one year at 10%
(b) what is the compound interest of the same investment is compounded semi annually ?
(c) how much is the compound interest greater than the simple interest ?
Compound amount
Aaron abbot invested 100,000 at 12% interest, compounded semi annually for 3 years. Manually calculate the compound amount and the compound interest of Aaron’s investment
Charlotte earns time-and-a-half on
Saturdays and double time on
Sundays. She works 35 hours from
Monday to Friday, 8 hours on
Saturday and 5 hours on Sunday.
Calculate Charlotte’s total earnings if
her normal rate of pay is $15.40 per
hour.
Charlotte earns time-and-a-half on Saturdays and double time on Sundays. She works 35 hours from
Monday to Friday, 8 hours on Saturday and 5 hours on Sunday.Calculate Charlotte’s total earnings if
her normal rate of pay is $15.40 per hour.
1. Amy made semiannual deposits of $3,100 at the beginning of every every six months into a fund earning 6.8% compounded semiannually for nine years. No further deposits were made.
a. How much will be in the account 15 years after the first deposit? _____________
b. How much in total was deposited? ______________
c. How much interest will Amy earn? _____________
2. What is the principal invested at 4.75% compounded semiannually from which monthly withdrawals of $240 can be made at the beginning of each month for 15 years? _________________
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4. Amanda borrowed $14,000 at 6.5% compounded semiannually. If the loan is to be repaid in equal semiannual payments over three years and the first payment is due four years after the date of the loan, what is the size of the semiannual payment? _______________
5. How much can be paid in scholarships at the end of each year if $150,000 is deposited in a trust fund and interest is 4.5% compounded annually? _____________
3. Mr. Buffett bought a property by agreeing to make semiannual payments of $12,500 for seven years. If the first payment is due on the date of the purchase and interest is 9% compounded quarterly,
a. What is the purchase price of the property? ______________
b. How much is the cost of financing? ________________
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Refinancing
Since interest rates have dropped, you consider refinancing your mortgage at a lower 6% rate.
If you took out a new 30-year mortgage at 6% for your remaining loan balance, what would your new monthly payments be?
How much interest will you pay over the life of the new loan?
Analyzing the refinance
Notice that if you refinance, you are going to be making payments on your home for another 30 years. In addition to the 10 years you've already been paying, that's 40 years total.
How much will you save each month because of the lower monthly payment?
How much total interest will you be paying (consider the interest you paid over the first 10 years of your original loan as well as interest on your refinanced loan)
Now the non-computational question: Does it make sense to refinance? (there isn't a correct answer to this question. Just give your opinion and your reason)
This year (10 years after you first took out the loan), you check your loan balance. Only part of your payments have been going to pay down the loan; the rest has been going towards interest. You see that you still have $100,400 left to pay on your loan. Your house is now valued at $180,000.
Your current situation
How much of the original loan have you paid off? (i.e, how much have you reduced the loan balance by? Keep in mind that interest is charged each month - it's not part of the loan balance.)
How much money have you paid to the loan company so far (over the last 10 years)?
How much interest have you paid so far (over the last 10 years)?
How much equity do you have in your home (equity is value minus remaining debt)
Suppose that 10 years ago you bought a home for $130,000, paying 10% as a down payment, and financing the rest at 7% interest for 30 years.
Your existing mortgage (the one you got 10 years ago)
How much money did you pay as your down payment?
How much money was your existing mortgage (loan) for?
What is your current monthly payment on your existing mortgage?
How much total interest will you pay over the life of the existing loan?
Suppose that 10 years ago you bought a home for $170,000, paying 10% as a down payment, and financing the rest at 9% interest for 30 years.
Your existing mortgage (the one you got 10 years ago)
How much money did you pay as your down payment?
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