Extra Problems 4

# Extra Problems 4 - of i u 2 U u 10 5 Rachel has to make...

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ACTSC 231 Extra Problem Set 4 1. A loan is repaid by 12 annual payments of \$500 followed by 12 annual payments of \$700. If interest on the loan is at 5% calculate: a. The amount of interest and principal in the 8th payment. b. The amount of interest and principal in the 15th payment. 2. When Billy bought his turkey farm, he took out a mortgage with a rate of i ue0a2 2 ue0a3 u003d 8%. After paying this month’s payment, he still has 25 monthly payments of \$3700 before the mortgage is paid off. a. What is the outstanding balance on his mortgage? b. Interest rates just fell to i ue0a2 2 ue0a3 u003d 7% , if the penalty for early repayment of the mortgage is \$750, should Billy refinance the mortgage? 3. A \$6,500 loan is to be amortized by 8 semi-annual payments over 4 years at i ue0a2 2 ue0a3 u003d 13.5%. Split the 5th and 6th payments into principle and interest. 4. A mortgage is being paid back with monthly installments of \$800. In the 13th installment \$600 in principal was repaid. What was the amount of the original mortgage if it charged a fixed rate
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Unformatted text preview: of i u 2 U u 10%? 5. Rachel has to make loan payments of \$780 at the end of each month for the next two years to finish repaying a three year loan with interest at i u 12 U u 14%. Her loan contract stipulates an early repayment penalty equal to 3 months’ payments. Rachel is now able to obtain a 2 year loan at i u 2 U u 8%. Calculate the new monthly payment she would need to make if she refinanced her loan. Should she refinance? 6. Karen has a \$200,000 mortgage. a. Calculate Karen’s regular monthly mortgage payment if the mortgage rate is 7% compounded semiannually and the mortgage is amortized over 20 years. b. Karen makes an extra payment (in addition to her regular monthly payment) of \$1000 at the end of each year. Calculate the total amount of interest Karen will pay during the first 5 years. c. If Karen continues to make payments as described in part b), calculate how long it will take her to payoff the mortgage....
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