Math of Finance


Question 1.

Calculate the following:

a.

b.

c.

Question 2.

$28.75 interest is paid on a loan of $1000 borrowed for 6 months. What is the simple interest rate?

Question 3.

Inflation has been running at approximately 3% per year. Assuming that this rate continues what will a car that cost $15,000 today cost in 20 years?

Question 4.

Joe want to have $1,000,000 in a saving account when he retires in 30 years. How much should he deposit today to achieve his goal if the account pays 8% compounded daily?

Question 5.

Bill and Jane want to establish an account to pay for their daughter's college education. They estimate they will need $100,000 in 17 years. It the account pays 4%, compounded quarterly, and they make deposits each quarter, what size deposits should they make?

Question 6.

When Sarah retires she plans to draw $2000 per month for 20 years from her retirement account which pays 6%, compounded monthly. How much does she need in the account when she retires?

Question 7.

A person borrows $8,000 to help finance college. It is to be repaid in monthly payments over an 8 year period at an annual rate of 8% compounded monthly. Compute the monthly payment?

Question 8.

A person borrows $12,000 to buy a new car. The loan is for 5 years at a 12% annual rate compounded monthly. Monthly payments are $266.93.

A. Fill in line 1 of the amortization schedule corresponding to the 1st payment.

Payment Nbr. Interest ($) Principal Balance Owed
0 - - $12,000.00
1

B. What is the total amount of interest paid on the loan?


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