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50. Compound Frequency Payday loans are very short-term loans that charge very high
interest rates. You can borrow $200 today and repay $250 in two weeks. What is the compound
annual
rate implied by this 25 percent rate charged for only two weeks?
51. Annuity Interest Rate What is the interest rate of a 4-year, annual $1,000 annuity with
present value of $3,500?
52. Annuity Interest Rate What is the interest rate of a 6-year, annual $3,000 annuity with
present value of $14,000?
53. Annuity Interest Rate What annual interest rate would you need to earn if you wanted a
$200 per month contribution to grow to $14,700 in five years?
54. Annuity Interest Rate What annual interest rate would you need to earn if you wanted a
$500 per month contribution to grow to $27,050 in four years?
55. Loan Payments You wish to buy a $20,000 car. The dealer offers you a 5-year loan with
an 8 percent APR. What are the monthly payments?
56. Loan Payments You wish to buy a $15,000 car. The dealer offers you a 4-year loan with
a 9 percent APR. What are the monthly payments?
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.
