Both loans have an apr of 72 a calculate the

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borrowing $132,000 and that you will be repaying the loan in monthly installments. Both loans have an A.P.R. of 7.2% a) Calculate the difference between the monthly payment on a 30-year loan and the monthly payment on a 15-year loan. b) What is the difference in the total amount of dollars that would be paid to the lender under each loan? c) What is the E.A.R. of the 15-year loan? d) What is the E.A.R. of the 30-year loan? 8. You have decided to buy a house for $140,000. You have saved enough money to make a 20% down payment, but you will need to borrow the remainder. You arrange for a 20-year mortgage (monthly payments) with a local bank at a stated rate of 6.6%. a) What is the total amount of interest that you will pay during the first year of the loan? b) What will the outstanding loan balance be after you have made one year of monthly payments? 9. Your Aunt Betsy is planning to retire in 8 years and needs your help in planning for her retirement. Betsy’s retirement goals are two-fold. First, Betsy plans to give each of her 4 children a lump sum of $33,000 on the day she retires. Betsy also wants to have enough additional money stashed away so that she can withdraw $4,000 per month (at the end of each month) for 20 years following her retirement. If Betsy can earn 0.5% per month on her money and she currently has $100,000 invested, how much will she need to save each month for the next 8 years to reach her retirement goal? 10. At the beginning of this year, Jonathan Bender and Jamal Tinsley signed three-year contracts with the Indiana Pacers. Jonathan’s monthly salary in the first year is $180,000. Jamal’s monthly salary in the first year is $120,000. Jonathan’s monthly salary will increase by 3% at the end of the first year and by an additional 3% at the end of the second year. Jamal’s monthly salary will increase by 5% at the end of the first year and by an additional 5% at the end of the second year. Jamal also received a one-time signing bonus at the beginning of his contract. Pacers management announced that after including Jamal’s signing bonus, both deals had the same present value. Assume that the appropriate discount rate is 6% compounded monthly. What was Jamal’s signing bonus? F301 TVM practice set II 2
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