Compounding interest
Not what you're looking for?
Unless stated otherwise, interest is compounded annually and payments are at the end of the year. Explanations should be brief (1 or 2 sentences).
1. Jana, who just turned 55, would like to have an annual annuity of $25,000 paid each year for 15 years, the first payment occurring on her 66th birthday. How much must Jana save each year (at the end of the year) for the next 10 years to have this annuity, if the interest rate is 8%?
2. You are considering a 30 year mortgage of $150,000 at 6% compounded monthly.
a) Find the payment amount on the mortgage.
b) Closing costs are 3% of the mortgage amount, are paid up front (when the loan is made) and are deducted from the loan proceeds. Find the APR on the mortgage (include the closing costs in determining the APR).
c) Suppose that in 10 years (after the 120th payment) interest rates fall. At what interest rate is it wise (you save money) to refinance the loan for a 20 year term? You will pay closing costs of 3% of the amount refinanced up front. Assume money is worth 7.2% compounded monthly (to you).
Purchase this Solution
Solution Summary
This problem involves the fundamentals of compound interest
Solution Preview
Hi There,
<br>
<br>Here are the solutions to your questions:
<br>
<br>1) Jana must save up an approximate amount of $231,000 over the course of the 10 years in order to pay out $25,000 per year. This amount can be verified by clicking on this ...
Purchase this Solution
Free BrainMass Quizzes
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Organizational Leadership Quiz
This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.
Introduction to Finance
This quiz test introductory finance topics.
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.