2
Numerical questions (4 points each)
1. You want to buy a house that costs (before down payment) $450,000. You make a 10%
down payment and finance the rest with a 30-year mortgage. The mortgage has a five
year renewal term for which the annual mortgage rate is 5.20% (APR compounded
semi-annually). What will the remaining principal of the loan be at the end of the 5-year
term if you are making monthly payments?
A) $272,400
B) $310,450
C) $372,662
D) $372,947
E) $414,068
2. In four years from today, the following cash flow stream will have a future value of
$5,104.64:
$100 today, $500 at the end of one year, $800 at the end of two years, “X”
at the end of three years, and $2,000 at the end of four years. The annual interest rate
is 6%. What is X?
A) $1,050
B) $1,200
C) $1,400
D) $1,484
E) $2,150
3. If $300,000 is borrowed for a home mortgage at a posted rate of 6.10% (APR semi-
annually compounded), how much interest can be saved over the life of the mortgage
by agreeing to a 20-year amortization period, rather than a 30-year amortization period?
Assume monthly payments and choose the closest answer.
A) $73,400
B) $82,824
C) $96,471
D) $110,715
E) $132,353
4. You are planning to set up a 30-year trust fund for your niece that will pay $5,000 at the
end of the first year and then the payments increase by 2.25% per year. The trust fund
will earn on average a 5.75% annual rate of return. How much money should you invest
today in order to provide the correct amount of funds to your niece?