Preparation Quiz W07 4D Math 108

2. The Andersons decide to get a home improvement loan. After going over their finances, they determine that the most they can budget for a monthly payment is $300. If they can get a 10-year loan at 8.25%, what is the maximum loan possible (rounded to nearest $)?

$24,459 Excel PV formula

4. Suppose that your neighbor is wondering how much of her house payment goes to principal on a given month and how much goes to interest. She informs you that the monthly payment is $998, their APR is 7% and the current balance (pay-off) is about $125,000. Determine how much, in dollars, of her monthly payment goes to principal and to interest this month.

$268.83 in principal and $729.17 in interest - Excel IMPT formula

3. Tim and Andrea Holt want to sell their '95 Chevy pickup and purchase a 2009 Toyota Camry with (14,250 miles on it) that is selling for $18,440. Assume they can get $1,500 out of their Chevy to use as a down payment on a loan for the Camry. Suppose interest rates are currently 4.5%, they want to keep their loan to 5 years in length, and sales tax is 6% (which will be added to the debt before the down payment is subtracted). What is their monthly payment?

$336.44

6. How much interest could be saved if a family borrowed the same $95,000 at 7.5% interest from the previous problem but financed the loan over 15 years instead of 30 years? (Hint: simply calculate the new payment first and multiply by 180 months and then compare this to the previous payment multiplied by 360 months. The difference between the two amounts would represent the interest saved on the shorter loan.)

$80,611.2

If you make monthly payments of $1000 on a 10-year loan, your total payments over the life of the loan amount to A) $120,000. B) $100,000. C) $10,000.

A) $120,000.

With the same APR and principal, a 15-year loan will have A) a higher monthly payment than a 30-year loan. B) a lower monthly payment than a 30-year loan. C) a payment that could be greater or less than that of a 30-year loan.

A) a higher monthly payment than a 30-year loan.

A $120,000 loan with $500 in closing costs plus 1 point requires an advance payment of A) $500. B) $1700. C) $1500.

B) $1700.

Consider two mortgage loans with the same principal and the same APR. Loan 1 is fixed for 15 years, and Loan 2 is fixed for 30 years. Which statement is true? A) Both loans will have the same monthly payments, but you' ll pay less total interest with Loan 1. B) Loan 1 will have lower monthly payments, and you'll pay less total interest over the life of the loan. C) Loan 1 will have higher monthly payments, but you'll pay less total interest over the life of the loan.

C) Loan 1 will have higher monthly payments, but you'll pay less total interest over the life of the loan.

In the early years of a 30-year mortgage loan, A) equal amounts go to principal and interest. B) most of the payment goes to the principal. C) most of the loan payment goes to interest.

C) most of the loan payment goes to interest.

5. Fill in the following blanks of the amortization schedule below: ($95,000 loan @7.5% for 30 years) What is the loan balance after month 4?

Date Payment Interest Principal Loan Balance 1 / 2014 n/a n/a n/a 95,000.00 2 / 2014, 664.25, 593.75, 70.50, 94,929.50 3 / 2014, 664.25, 593.31, 70.94, 94858.56 4 / 2014, 664.25, 592.87, 71.38, 94,787.18

1. Suppose that you need a loan of $10,000 and are offered a choice of a 3-year loan at 7% interest or a 5-year loan at 8% interest. Find the monthly payment and total interest for each. Then state a pro and a con for each loan (in terms of the payment and total interest).

Loan 1= PMT of $308.77 and interest of $1,115.72 Loan 2 = PMT of $202.76 and interest of $2,165.60 Loan one is the best option if you can afford the higher payment since you will pay less over the life of the loan.

7. Consider the following credit card scenario and show the figures that would go in each column in the table below (similar to Problem #33 in 4D of your text): You start (Month 0) with a balance on the credit card of $789.56. Your APR is 17.5% compounded monthly. In Month 1 you pay $120 on the card balance but have purchase charges of $45.69. In Month 2 you pay $150 and have charges of $78.24. Finally in Month 3 you pay $250 but make some minor purchase charges of $23.19. What is your new balance after Month 3? How much did you pay in total interest over the three months?

Month Payment Expenses Interest New Balance 0 n/a n/a n/a 789.56 1) 120, 45.69, 11.51, 726.76 2) 150, 78.24, 10.59, 665.60 3) 250, 23.19, 9.71, 448.50 Total Paid in Interest is $31.81