How much should he be willing to pay to get out of a 14 percent mortgage and into a 10 percent mortgage with 25 years remaining on the mortgage? (Disregard taxes)
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1) You need $28,974 at the end of 10 years, and your only investment outlet is an 8 percent long term certificate of deposit (compounded annually). With the certificate of deposit, you make an initial investment at the beginning of the first year.
a) What single payment could be made at the beginning of the first year to achieve this objective?
b) What amount could you pay at the end of each year annually for 10 years to ahieve this same objective?
2) Sue Sussman started a paper route on January 1, 1998. Every three months, she deposits $500 in her bank account, which earns 4 percent annually but is compounded quarterly. On December 31, 2001, she used the entire balance in her bank account to invest in a contract that pays 9 percent annually. How much will she have on December 31, 2004?
3) Dr. I.N Stein has just invested $6,250 for his son (age 1). The money will be used for his sons education 17 years from now. He calculates that he will need $50,000 for his son's education by the time the boy goes to school. What rate of return will Dr. Stein need to achieve this goal?
4) Betty Bronson has just retired after 25 years with the electric company. Her total pension funds have an accumulated value of $180,000, and her life expectancy is 15 more years. Her pension fund manager assumes he can earn a 9 percent return on her assets. What will be her yearly annuity for the next 15 years?
5) Larry Davis borrows $80,000 at 14 percent interest toward a purchase of a home. His mortgage is for 25 years.
a) How much will his annual payments be? (not monthly)
b) How much interest will pay over the life of the loan?
c) How much should he be willing to pay to get out of a 14 percent mortgage and into a 10 percent mortgage with 25 years remainingon the mortgage? (Disregard taxes)
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