Today you are opening a savings account and depositing an initial $2,000 Into it
ID: 2453876 • Letter: T
Question
Today you are opening a savings account and depositing an initial $2,000 Into it. You plan to deposit $3,000 into the account three yean from today and deposit another $5,000 four years from today. How much will you have in your account five years from today if you earn a 10 percent rate of return? What is the effective annual rate of 12.5 percent compounded monthly? What is the effective annual rate of 14.7 percent compounded daily? You borrow $155,000 for thirty-five years at 7 percent. This is an amortized loan with monthly payments. How much of the first payment goes to the principle balance of the loan? Assume that one month is equal to 1/12 of a year.Explanation / Answer
6)
Amount in 5 Year = Initial deposit*(1+r)^5 + Deposit in 3 year *(1+r)^2 + Deposit in 4 year *(1+r)
Amount in 5 Year = 2000*(1+10%)^5 + 3000 *(1+10%)^2 + 5000 *(1+10%)
Amount in 5 Year = 12351.02
7)
Effective Annual Rate = (1+ APR/12)^12 - 1
Effective Annual Rate = (1+12.5%/12)^12 - 1
Effective Annual Rate = 13.24%
8)
Effective Annual Rate = (1+ APR/365)^365 - 1
Effective Annual Rate = (1+14.7%/365)^365-1
Effective Annual Rate = 15.83%
9)
Monthly payment = pmt(rate,nper,pv,fv)
Monthly payment = pmt(7%/12,420,-155000,0)
Monthly payment = $ 990.23
Interest Payment in first payment = 155000*7%*1/12 = 904.17
Principal payment = Monthly payment - Interest Payment in first payment
Principal payment = 990.23 - 904.17
Principal payment = $ 86.06
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