82.
A perpetuity pays $250 per year and interest rates are 5.5 percent. How much would its
value change if interest increased to 8.5 percent? Did the value increase or decrease?
83.
If you start making $115 monthly contributions today and continue them for six years,
what is their present value if the compounding rate is 12 percent APR? What is the
present value of this annuity?
84.
Payday loans are very short-term loans that charge very high interest rates. You can
borrow $550 today and repay $675 in two weeks. What is the compounded annual rate
implied by this 22.73 percent rate charged for only two weeks?
85.
What is the interest rate of a 6-year, annual $10,000 annuity with a present value of
$40,000?
86.
What annual interest rate would you need to earn if you wanted a $1,250 per month
contribution to grow to $65,000 in three years?
87.
You wish to buy a $30,000 car. The dealer offers you a 5-year loan with a 9 percent APR.
What are the monthly payments? What is the monthly payment if you paid interest only?
88.
Isaac realizes that he charged too much on his credit card and has racked up $5,000 in
debt. If he can pay $225 each month and the card charges 17.55 percent APR
(compounded monthly), how long will it take him to pay off the credit card?
89.
Isaac realizes that he charged too much on his credit card and has racked up $7,000 in
debt. If he can pay $275 each month and the card charges 17.55 percent APR
(compounded monthly), how long will it take him to pay off the credit card? How much
interest expense will Isaac pay during this time?
90.
Given a 10 percent interest rate, compute the year 9 future value if deposits of $10,000
and $20,000 are made in years 1 and 5 respectively, and a withdrawal of $5,000 is made in
year 7.
91.
A car company is offering a choice of deals. You can receive $600 cash back on the
purchase, or a 2 percent APR, 4-year loan. The price of the car is $18,900 and you could
obtain a 4-year loan from your credit union at 6 percent APR. What is the monthly payment
of each deal?
92.
A furniture company is offering a choice of deals. You can receive $100 cash back on the
purchase, or a 2 percent APR, 2-year loan. The price of the dining room set is $3,750 and
you could obtain a 2-year loan from your credit union at 6 percent APR. What is the cost
per month of each deal?
93.
What is the amount of interest and repayment of principal balance in month 2 for a loan of
$10,000, paid monthly over five years at a 7 percent APR?
94.
Jasmine has decided that she wants to build enough retirement wealth that, if invested at
6 percent per year, will provide her with $3,000 of monthly income for 30 years. To date,
she has saved nothing but she still has 25 years until she retires. Jasmine believes that
she can earn 6 percent on her investments until she retires. How much money does she
need to contribute per month to reach her goal?
95.
Jasmine has decided that she wants to build enough retirement wealth that, if invested at
6 percent per year, will provide her with $3,000 of monthly income for 30 years. To date,
she has saved nothing but she still has 25 years until she retires. Jasmine believes that
she can earn 9 percent on her investments until she retires. How much money does she
need to contribute per month to reach her goal?
96.
Chase purchased a $23,000 car three years ago using a 14 percent, 6-year car 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 Chase would need to receive for his car?
(Assume monthly payments.)
97.
Chase purchased a $30,000 car three years ago using a 10 percent, 5-year car 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 Chase would need to receive for his car?
(Assume monthly payments.)
98.
A mortgage broker is offering a $225,000 30-year mortgage with a teaser rate. In the first
two years of the mortgage, the borrower makes monthly payments on only a 2.5 percent
APR interest rate. After the second year, the mortgage interest rate charged increases to
8.5 percent APR. What are the mortgage payments in the first two years? What are the
mortgage payments after the second year?
99.
Consider that you are 30 years old and have just changed to a new job. You have $91,000
in the retirement plan from your former employer. You can roll that money into the
retirement plan of the new employer. You will also contribute $4,800 each year into your
new employer’s plan. If the rolled-over money and the new contributions both earn a 7
percent return, how much should you expect to have when you retire in 38 years?
100.
Consider that you are 30 years old and have just changed to a new job. You have $91,000
in the retirement plan from your former employer. You can roll that money into the
retirement plan of the new employer. You will also contribute $400 each month into your
new employer’s plan. If the rolled-over money and the new contributions both earn a 7
percent annual return, how much should you expect to have when you retire in 38 years?
101.
Your client has been given a trust fund valued at $1 million. She cannot access the money
until she turns 68 years old, which is in 12 years. At that time, she can withdraw $30,000
per month. If the trust fund is invested at a 7 percent interest rate, how many months will
it last your client once she starts to withdraw the money?
102.
A local furniture store is advertising a deal in which you buy a $3,500 living room set with
three years before you need to make payments (no interest is incurred). How much would
you have to deposit each month in a savings account earning 3.5 percent APR,
compounded monthly, to be able to pay the $3,500 bill in three years?
103.
A local furniture store is advertising a deal in which you buy a $3,500 living room set with
three years before you need to make payments (no interest is incurred). How much money
would you have to deposit now in a savings account earning 3.5 percent APR, compounded
monthly, to pay the $3,500 bill in three years?
104.
You have secured a loan from your bank for two years to build your home. The terms of
the loan are that you will borrow $120,000 now and an additional $52,000 in one year.
Interest of 9 percent APR will be charged on the balance monthly. Since no payments will
be made during the 2-year loan, the balance will grow. At the end of the two years, the
balance will be converted to a traditional 30-year mortgage at a 6.5 percent interest rate.
What will you pay as monthly mortgage payments (principal and interest only)?
105.
Say that you purchase a house for $150,000 by getting a mortgage for $135,000 and paying
a $15,000 down payment. If you get a 15-year mortgage with a 6 percent interest rate,
what are the monthly payments?
106.
Say that you purchase a house for $150,000 by getting a mortgage for $135,000 and paying
a $15,000 down payment. If you get a 15-year mortgage with a 6 percent interest rate,
what would the loan balance be in seven years?