On September 1, 2013, Susan Chao bought a motorcycle for $34,000. She paid $2,000 down and financed the balance with a five-year loan at an annual percentage rate of 7.2 percent, compounded monthly.
She started the monthly payments exactly one month after the purchase (i.e., October 1, 2013). Two years later, at the end of October 2015, Susan got a new job and decided to pay off the loan.
If the bank charges her a 1 percent prepayment penalty based on the loan balance, how much must she pay the bank on November 1, 2015?
Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with a retirement income of $20,000 per month for 20 years, with the first payment received 30 years and from now.
Second, he would like to purchase a cabin in Rivendell 10 years at an estimated cost of $350,000. Third, after he passes on at the end of the 20 years of withdrawals, he would like to leave an inheritance of $1, 500,000 to his nephew Frodo He can afford to save $2, 100 per month for the next 10 years.
If he can earn an EAR of percent before he retires and an EAR of 8 percent after he retires, how much will he have to save each month in Years 11 through 30?