Chapter7HANDOUT2

# Chapter7HANDOUT2 - Your first withdrawal will be one year...

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Chapter 7: Part 2 1) A credit card company quotes you an annual interest rate of 18% compounded monthly. What is the effective rate of interest? 2) You just bought a car for \$10,000. You paid for it with a car loan that will require you to make yearly equal payments starting next year and ending in four years. If the interest rate on this loan is 6% p.a., draw out the amortization table for this loan.

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3) Today is your 25 th birthday. You wish to retire when you turn 60 (t=35). In order to do so, you plan on depositing equal payments every year starting today into a savings account earning 6% p.a. After you retire you will withdraw money for medical and housing expenses that will be \$50,000 per year.
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Unformatted text preview: Your first withdrawal will be one year after retirement (t=36) and will continue until you turn 80 (t=55). In addition, when you turn 80, you wish to leave \$100,000 to your grandchildren. How much money do you need to deposit each year to cover your retirement expenses? 4) You just bought a house today for \$250,000. The house was completely financed using a mortgage which charges an annual yield of 6%, with equal payments due to the bank paid monthly starting next month for 30 years (last payment 30 years from today). What is the monthly payment you owe to the bank? What is your balance after you made your payment 10 years from today?...
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## This note was uploaded on 12/04/2011 for the course FIN 3300 taught by Professor Toddstotnitch during the Fall '11 term at Georgia State University, Atlanta.

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Chapter7HANDOUT2 - Your first withdrawal will be one year...

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