BUS 125 Final summer class (13-15)

Bill Moore took out an $80,000 mortgage on a ski chalet. The bank charged 4 points at closing. The points in dollars cost Bill:

$ 3,200 Mortgage on ski chalet = $80000 Charge by Bank at closing ( in Points) = 4 The points in dollars cost Bill is $ 80000 * 0.04 = $3,200

Amanda Chin purchased a home for $296,000; she put 20% down with a mortgage rate of 6% for 30 years. What is Amanda's monthly payment?

$1,420.80

Lizzy Clar bought a home for $160,000, putting down $30,000. The rate of interest is 7% for 25 years. The total yearly mortgage payment is

$11,029.20 (160k-30k=130k $130 × $7.07 = $919.10 $919.10 × 12 months = $11,029.20)

The difference between the monthly payments on a $120,000 home at 6 ½% and at 8% for 25 years is

$115.20

Jones Co. borrowed money that is to be repaid in 12 years. So that the loan will be paid back at end of the 12th year, the company invests $8,000 at end of each year at 5% compounded annually. The amount of the original loan was

$127,336.80

Stu Reese has a $150,000 7 ½% mortgage. His monthly payment is $1,010.10. His first payment will reduce the principal to an outstanding balance of

$149,927.40 ($150,000 x .075 x (1/12) = $937.50 $1010.10 - $937.50 = $72.60 $150,000.00 - $72.60 = $149,927.40)

Joe Jay purchased a new colonial home for $260,000, putting down 20%. He decided to use Loyal Bank for his mortgage. They were offering a 6 1/2% for a 25-year mortgage. The principal after the first payment had a balance outstanding of

$207,720.59 ($260,000 x .8 = $208,000; $208,000 x .065 x 1/12 = $1,126.67 $208 x $6.76 = $1406.08 - $1,126.67 = $279.41 $208,000 - $279.41 = $207,720.59.)

Ed Sloan bought a new Explorer for $22,000. He put down $7,000 and paid $290 for 60 months. The total finance charge to Ed is

$2400

John Sullivan bought a new Brunswick boat for $17,000. He made a $2,500 down payment on it. The bank's loan was for 60 months. Finance charges totaled $4,900. His monthly payment is

$323.33 He owes 17000-2500=14500 after the down payment. Add 4900 for finance charges and he owes 19400 still. Divide 19400 by 60 to get a payment of $323.33 per month.

At the beginning of each year, Bill Ross invests $1,400 semiannually at 8% for nine years. The cash value of the annuity due at the end of the ninth year is

$37,339.18

Joe Sullivan invests $9,000 at the end of each year for 20 years. The rate of interest Joe earns is 8% annually. The final value of Joe's investment at the end of the 20th year on this ordinary annuity is

$411,857.68 amount = 9000(1.08^20 - 1)/.08 = 9000(45.7619643) = $411,857.68

Given a mortgage of $48,000 for 15 years with a rate of 11%, what are the total finance charges?

$50,236.80 ($48,000/$1000 = 48; 48 x $11.37 = $545.76; $545.76 x 180 = $98,236.80; $98,236.80 - $48,000 = $50,236.80)

Ted Williams made deposits of $500 at the end of each year for eight years. The rate is 8% compounded annually. The value of Ted's annuity at the end of eight years is (use the tables in the handbook):

$5318.31 Yearly deposit at the end of each year = $500 NO of years = 8 ROI = 8% compounded annually Maturity amount = 5318.31 $, out of which principal 4000 and interest 1318.31

Mia Lane bought a high-definition television for $7,500. Based on her income, she could afford to pay back only $600 per month. There is 1 ½% monthly interest charge on the unpaid balance. The U.S. Rule is used in the calculation. At the end of month 1, the balance outstanding is

$7,012.50 Principal Borrowed $ 7,500.00 Monthly Interest Rate 1.50% Amount paid per month$600.00 Principal due post 1 month =7500*(1+1.5%) $ 7,612.50 Unpaid Principal Balance (UPB)$ 7,012.50

Jill Diamond bought a home for $190,000 with a down payment of $65,000. The rate of interest was 7% for 35 years. Her monthly mortgage payment is

$798.75 (190k-65k=125 125x6.39=798.75) 6.39 is the 7%rate for 35yrs.

Nancy Billows promised to pay her son $600 quarterly for four years. If Nancy can invest her money at 6% in an ordinary annuity, she must invest how much today? (Use the tables in the handbook.)

$8,478.72

Megan Mei is charged 2 points on a $120,000 loan at the time of closing. The original price of the home before the down payment was $140,000. The points in dollars cost Megan

=120000*2/100 =2400

In calculating the daily balance, cash advances are

Added in

A sinking fund

Aids in meeting a future obligation

Payments in annuities must be made

Annually, semi annually, or quarterly

In an ordinary annuity the interest on a yearly investment starts building interest

At the end of the first period

Most companies calculate the finance charge on credit card accounts as a percentage of the

Average daily balance

Amount financed is equal to

Cash price- down payment

The present value of an ordinary annuity

Indicates how much money needs to be invested today

The finance charge is equal to the total of all monthly payments

Minus amount financed

The total cost of interest is equal to the total of all monthly payments

Minus amount of mortgage

An amortization schedule shows

Portion of payment broken down to interest and principal

An annuity due can use the ordinary annuity table if one extra period is added and

Subtract one payment from total value

The APR represents the

True effective annual rate of interest charged by seller