Exam 22: Borrowing Models

Your Great Aunt Sally loans you $1000 for two years and asks that you repay it with annually compounding interest at the rate of 5% per year. How much do you repay her after two years?

Suppose a student loan has an interest rate of 7% compounded monthly with monthly payments and the borrower has 10 years to repay. If $12,000 is borrowed, what are the monthly payments?

Find the future value of an annuity with monthly deposits of $75, made over a period of 10 years, with 8% interest compounded monthly.

The following Questions deal with payday loans. Assume the payday loan gets paid back in two weeks (1/26 of a year). At the end of two weeks, the borrower pays back the loan plus a fee. -If the fee on a $300 loan is $50, what is the APR? A)367% B)400% C)433% D)500%

Which of these savings rates is most favorable?

David takes out a conventional loan to purchase a car. The interest rate is 4.8% compounded quarterly and David has four years to repay the $8000 he borrowed. What are David's quarterly payments?

What is the up-front investment required in an annuity paying out $500 per month over 10 years if the interest rate is 5% compounded monthly?

A 20-year annuity invests its assets at an annual rate $r$ compounded monthly. You invested in this annuity to get a monthly income of $300 per month. If you wanted to get $500 per month instead from the same annuity, what total would you have to invest?

Which of these loan rates is most favorable?

Your Great Aunt Sally loans you $1000 for two years and asks that you repay it with simple interest at the rate of 5% per year. How much do you repay her after two years?

How much would you have to invest each month in an annuity earning 5% monthly to earn $30,000 at the end of 30 years?

The following Questions deal with payday loans. Assume the payday loan gets paid back in two weeks (1/26 of a year). At the end of two weeks, the borrower pays back the loan plus a fee. -If the fee on a $200 loan is $20, what is the APR?

What would be the monthly payment on an add-on loan from a credit union at 5% over 36 months for the principal of $2000? Round to nearest cents.