Calculate the amount owed at the end of the following loans: $1000 for 5 years, 5% simple interest ...

Question

Calculate the amount owed at the end of the following loans:

$1000 for 5 years, 5% simple interest

$2000 for 10 years, 6% interest compounded annually

$3000 for 15 years, 7% interest compounded semi-annually

$4000 for 20 years, 8% interest compounded monthly

2) Calculate the Effective Annual Yield on the following loans:

5% compounded annually

4.95% compounded semi-annually

4.9% compounded monthly

Which loan is the most friendly to the borrower?

3) How much would you need to start with to have $2000 at the end of 5 years with 10% interest compounded semi-annually?

4) How long would it take for $1000 to turn into $1500 at 8% interest compounded annually?

5) Consider you buy a house for $200,000 at 4.05% interest rate.

a. What is your monthly mortgage payment if you have a 30 yr fixed rate mortgage?

b. What is your monthly mortgage payment if you have a 15 yr fixed rate mortgage?

c. Bonus: What will your second set of mortgage payments be if you sign a 5/1 ARM and the interest rate increases to 4.25% at the end of year 5?

6) You finance a car that costs $20,000. You are able to make a $5,000 down payment. You agree to 9% add on interest over 4 years. What is your monthly car payment?

homework-6-1-sjtokvbs.docx

Sultana · Accepted Answer

Homework 6
1)  Calculate the amount owed at the end of the following loans:
$1000 for 5 years, 5% simple interest
$2000 for 10 years, 6% interest compounded annually
$3000 for 15 years, 7% interest compounded semi-annually
$4000 for 20 years, 8% interest compounded monthly
Solution
2) Calculate the Effective Annual Yield on the following loans:
5% compounded annually
Effective Annual Yield = 5%
4.95% compounded semi-annually
There are 2, semi annual periods in a year
Effective Annual Yield = (1 + nominal rate/periods)^periods - 1 
Effective Annual Yield = (1 + 0.0495/2)^2 - 1 
Effective Annual Yield = (1 + 0.02475)^2 - 1 
Effective Annual Yield = 1.0501 - 1 
Effective Annual Yield = 0.0501 or 5.01%
4.9% compounded monthly
There are 12 months in a year
Effective Annual Yield = (1 + nominal rate/periods)^periods - 1 
Effective Annual Yield = (1 + 0.049/12)^12 - 1 
Effective Annual Yield = (1 + 0.00408)^12 - 1 
Effective Annual Yield = 1.

Calculate the amount owed at the end of the following loans: $1000 for 5 years, 5% simple interest $2000 for 10 years, 6% interest compounded annually $3000 for 15 years, 7% interest compounded...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment