FM (1).docx

# FM (1).docx - 1.If you deposit \$17,000 today in an account...

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1.If you deposit \$17,000 today in an account earning an annual rate of return of 10%, how much interest would be earned in the third year? How much would this amount differ from simple interest? 2.What is the future value of \$500 a year for 9 years compounded annually at 10%? What is the future value of \$900 for nine years compounded annually at 10%? b)900{(1+0.1) 9 =2122.15 a) Periodic payment-500 Time-9yrs Rate-10% Future value =500(1.1 9 -1)/0.1 Deposit \$17,000 Rate 10% 1st Year interest 10% * \$17000=\$1700 2nd Year 10%*(1700+17000)=\$1870 3rd Year 10%*(1700+1870+1700)=\$2057 Interest on the basis of simple interest 10*1700=\$1700 Difference in the third year 2057-1700=\$357

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6789.738 3. To buy a new house, you must borrow \$150,000. To do this, you take out a \$150,000, 20-year, 10% mortgage. Your mortgage payments, which are made at the end of each year (one payment each year), include both principle and 10% interest on the declining balance. What amount will your annual payment be? 4. Pay for your education, you have taken out \$28,000 in student loans. If you make monthly payments over 13
• Summer '16
• Dr. Willy

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