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).

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 ...

Solution Summary

This problem involves the fundamentals of compound interest

25. The stated rate of interest is 10%. Which form of compounding will give the highest effective rate of interest?
A. annual compounding
B. monthly compounding
C. daily compounding
D. continuous compounding
E. It is impossible to tell without knowing the term of the loan.

suppose the deposit $20,000 for 5 yrs @ 8% rate what is the return annually (n = 1) and quarterly (n = 4).
Round both to the hundredth place.
c) Does compounding annually or quarterly yield more interest and explain
d) if a bank compounds continuously the the formula used is A=Pe^rt where e is a constant and equals

Please use Excel and show a cash flow time line to solve the following:
I'm purchasing a 10-year bond with a $1,000 face value that pays interest of $60 semiannually. The yield to maturity is 10 percent with semiannual compounding. What price should I pay for the bond?

Using Microsoft Excel, calculate the total amount you will receive in a year if you invest $1,000 now (assuming the interest rate is 8% per annum) at:
a. yearly compounding
b. semiannually compounding
c. quarterly compounding
d. daily compounding

1. Calculate the return (A) if the bank compounds daily (n = 365). Round the answer. using this formula:
A=P(1+r/n)^ nt
2. If a bank compounds continuously, then the formula takes a simpler, that is A= P e(n)squared where e is a constant and equals approximately 2.7183. Calculate A with continuous compounding

An initial deposit of $3000 is made in a savings account for which the interest is compounded continuously. The balance will double in seven years. What is the annual interest rate for this account?
Please show all work and logic in getting the answer.

I am in Pre-Calc and we are covering the number e and the function e^x. I do not understand how to compound continuously. Please explain how to do this. Here is my problem: Suppose you invest $1.00 at 6% annual interest. Calculate the amount that you would have after one year if the interest is compounded continuously.

Chapter 4 in the Finance: Applications and Theory textbook by Cornett, Adair, and Nofsinger provides an introduction to the main concepts of the time value of money for a single cash flow amount. These concepts are important in finance, because cash flows analyzed in most of finance occur at various periods of time, and adjustme