57.
Number of Annuity Payments Joey realizes that he has charged too much on his credit
card and has racked up $3,000 in debt. If he can pay $150 each month and the card
charges 18 percent APR (compounded monthly), how long will it take him to pay off the
debt?
58.
Number of Annuity Payments Joey realizes that he has charged too much on his credit
card and has racked up $4,000 in debt. If he can pay $200 each month and the card
charges percent 20 APR (compounded monthly), how long will it take him to pay off the
debt?
59.
Number of Annuity Payments Phoebe realizes that she has charged too much on her
credit card and has racked up $7,000 in debt. If she can pay $200 each month and the card
charges 17 percent APR (compounded monthly), how long will it take her to pay off the
debt?
60.
Number of Annuity Payments Phoebe realizes that she has charged too much on her
credit card and has racked up $10,000 in debt. If she can pay $300 each month and the
card charges 18 percent APR (compounded monthly), how long will it take her to pay off
the debt?
61.
Future Value Given a 7 percent interest rate, compute the year 6 future value if deposits
of $2,500 and $1,500 are made in years 2 and 3, respectively, and a withdrawal of $900 is
made in year 4.
62.
Future Value Given an 8 percent interest rate, compute the year 7 future value if deposits
of $1,500 and $2,500 are made in years 2 and 3, respectively, and a withdrawal of $2,000
is made in year 5.
63.
Low Financing or Cash Back A car company is offering a choice of deals. You can receive
$2,000 cash back on the purchase, or a 2 percent APR, 3-year loan. The price of the car is
$17,000 and you could obtain a 3-year loan from your credit union, at 7 percent APR.
Which deal is cheaper?
64.
Investing for Retirement Monica has decided that she wants to build enough retirement
wealth that, if invested at 7 percent per year, will provide her with $3,000 monthly income
for 30 years. To date, she has saved nothing, but she still has 20 years until she retires.
How much money does she need to contribute per month to reach her goal?
65.
Investing for Retirement Ross has decided that he wants to build enough retirement
wealth that, if invested at 6 percent per year, will provide him with $2,500 monthly income
for 30 years. To date, he has saved nothing, but he still has 20 years until he retires. How
much money does he need to contribute per month to reach his goal?
66.
Loan Balance Hank purchased a $20,000 car two years ago using an 8 percent, 5-year
loan. He has decided that he would sell the car now, if he could get a price that would pay
off the balance of his loan. What is the minimum price Hank would need to receive for his
car?
67.
Teaser Rate Mortgage A mortgage broker is offering a 30-year mortgage with a teaser
rate. In the first two years of the mortgage, the borrower makes monthly payments on only
a 5 percent APR interest rate. After the second year, the mortgage interest charged
increases to 8 percent APR. What is the effective interest rate in the first two years? What
is the effective interest rate after the second year?
68.
Teaser Rate Mortgage A mortgage broker is offering a 30-year mortgage with a teaser
rate. In the first two years of the mortgage, the borrower makes monthly payments on only
a 5.5 percent APR interest rate. After the second year, the mortgage interest charged
increases to 8.5 percent APR. What is the effective interest rate in the first two years?
What is the effective interest rate after the second year?
69.
Compute the future value in year 12 of a $2,000 deposit in year 3 and another $4,000
deposit at the end of year 5 using a 10 percent interest rate.
70.
What is the future value of a $500 annuity payment over eight years if interest rates are 14
percent?
71.
Compute the present value of a $2,500 deposit in year 4 and another $10,000 deposit at
72.
What is the present value of a $775 annuity payment over six years if interest rates are 11
percent?
73.
What is the present value of a $1,100 payment made every year forever when interest
rates are 4.5 percent?
74.
If the present value of an ordinary, 8-year annuity is $12,500 and interest rates are 9.1
percent, what is the present value of the same annuity due?
75.
If the future value of an ordinary, 11-year annuity is $5,575 and interest rates are 5.5
percent, what is the future value of the same annuity due?
76.
A loan is offered with monthly payments and a 14.5 percent APR. What is the loan’s
effective annual rate (EAR)?
77.
Given a 7 percent interest rate, compute the year 8 future value of deposits made in years
1, 2, 3, and 4 of $750, $1,200, $500, and $250.
78.
Assume that you contribute $300 per month to a retirement plan for 25 years. Then you
are able to increase the contribution to $500 per month for 20 years. Given a 9 percent
interest rate, what is the value of your retirement plan after 45 years?
79.
Given an 8 percent interest rate, compute the present value of payments made in years 1,
2, 3 and 4 of $900, $800, $700, and $600.
80.
A small business owner visits his bank to ask for a loan. The owner states that she can
repay a loan at $2,500 per month for the next two years and then $3,000 per month for
another two years after that. If the bank is charging customers 6.5 percent APR, how much
would it be willing to lend the business owner?
81.
A perpetuity pays $250 per year and interest rates are 8.5 percent. How much would its
value change if interest decreased to 5.5 percent? Did the value increase or decrease?