Exam 22: Borrowing Models

Your rich Uncle Ralph is willing to loan you $50,000 for five months and asks that you repay your loan with monthly compounding interest at the rate of 24% per year. How much interest will you pay?

How much would you have to invest each quarter in an annuity earning 5% quarterly to earn $5000 at the end of five years?

Your grandmother decides that the monthly income in Question 58 is not enough: She would like $2000 per month from the annuity. Again assume 4% compounded monthly on a 20-year annuity. How much, rounded to the nearest $1000, should she invest up front?

Suppose that you need $2500 to cover an unexpected expense. If you are applying for a discounted loan at an interest rate of 5% per year for 2 years, what is the monthly payment?

Which of these savings rates is most favorable?

Which is a more favorable savings rate: 4.5% compounded monthly or 4.52% compounded quarterly?

Suppose that you need $4000 to purchase equipment. If you are applying for a discounted loan at an interest rate of 5% per year for 3 years, how much do you need to borrow to cover the principal?

How much would you have to invest each quarter in an annuity earning 5% quarterly to earn $20,000 at the end of 20 years?

A credit card bill shows a balance due of $980 with a monthly interest rate of 1.91%. What is the EAR?

Moe takes out a conventional loan to purchase a car. The interest rate is 8.3% compounded monthly and Moe has eight years to repay the $12,000 he borrowed. What are Moe's monthly payments?

Suppose a student loan has an interest rate of 6.2% compounded monthly with monthly payments and the borrower has 10 years to repay. If $5000 is borrowed, what are the monthly payments?

You invest $75 each month into an annuity earning 6.2% each month. How much do you have at the end of 18 years?

A credit card bill shows a balance due of $2500 with a monthly interest rate of 1.53%. What is the APR?

If you get a discounted loan for the principal of $2000 at an interest rate of 5% per year for three years, what will be the monthly payment? Round to nearest cents.

Find the future value of an annuity with monthly deposits of $250, made over a period of eight years, with 6% interest compounded monthly.

Which is a more favorable savings rate: 3.5% compounded monthly or 3.6% compounded annually?

Find the future value of an annuity with monthly deposits of $60, made over a period of 10 years, with 8.1% interest compounded monthly.

Your Great Aunt Sally loans you $1000 for seven months and asks that you repay it with monthly compounding interest at the rate of 1% per month. How much do you repay her after seven months?

You invest $300 each quarter into an annuity earning 8.1% each quarter. How much do you have at the end of 20 years?

Suppose that you need $3000 to purchase a car. If you are applying for a discounted loan at an interest rate of 5% per year for two years, how much do you need to borrow to cover the principal?