Discussion:
1.An individual is borrowing $175,000 for a 20 year loan at 3.95% per year compounded monthly. Compute the monthly payment.
2. Continue on Q 1: Immediately after the 104th monthly payment, the home owner plans to sell the house. How much money is owed back to the bank?
3. Alternative to Q 2. Immediately after the 104th payement, the home owner wins a $25,000 lottery ticket, decides to keep the house and continue making payements of the same monthly amount. How long will it take to pay off the mortgage?
4. One more question on the mortage of Q 1: Compute tha spilt between principal and interest paid with the 80thmonthly payment of this loan.
1. An international bank is charging a nominal intrest rate of 0.75% per year compounded continuously. What is the effective annual interest rate?
2. A CE graduate begins working when she turns 28 at an annual salary of $67,000. She is promised raises of 2.5% per year every year. She palns to set aside 10% of her salary into a retirement plan (i.e., her first retirement set aside amount is $67,000x0.1=$6,700, the 2nd is $67,000x1.025x0.1=$6,867.5 and so on). She plans to work till her 60th birthday. How much she would have accumulated at retirement assuming that her retirement account makes an average annual ineterst of 4.3% per year (ignore inflation).
3. Continue on Q 6: What is the annual pension she can afford drawing from this retirement account, starting on her 61st birthday, assuming she will live to turn 85?