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Quick answers

Quick answers. If the bank is offering 12% per year compounded quarterly what would be the value of “i” in the Amount of an annuity formula? If the Nicole buys a car for $12000 and pays monthly for 3 years what is the “n” value of the formula?.

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Quick answers

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  1. Quick answers • If the bank is offering 12% per year compounded quarterly what would be the value of “i” in the Amount of an annuity formula? • If the Nicole buys a car for $12000 and pays monthly for 3 years what is the “n” value of the formula?

  2. What questions could you ask about this TVM entry? Answer them!! N=36 I%=5.4 PV=12 000 PMT =-361.81 FV=0 P/Y=12 C/Y=12 PMT=END BEGIN

  3. Determine the amount saved if $375 is deposited every month for 6 years at 5.9% per year compounded monthly. N = 12 X 6 = 72 I% = 5.9 PV = 0 PMT = -375 FV = 32302.36 P/Y = 12 C/Y = 12 How much interest was earned? $5302.35

  4. Geneva’s parents saved for her college education by depositing $1200 at the end of each year in a Registered Education Savings Plan (RESP) that earns 6% per year compounded annually. How much is there at the end of 18 years? N = 18 I% = 6 PV = 0 PMT = 1200 FV = 37086.78 P/Y = 1 C/Y = 1 How much interest has been earned? $15486.78

  5. Use the formula to solve:Victor wants to withdraw $700 at the end of each month for 8 months, starting 1 month from new. His bank account earns 5.4% per year compounded monthly. How much must Victor deposit in his bank account today to pay for the withdrawls? i = 5.4 ÷ 12 ÷ 100 = .0045 n = 8 Use formula: answer is $5488.28

  6. Use the formula to solve:Suppose $450 is deposited at the end of each quarter for 1.5 years in an investment account that earns 10% per year compounded quarterly. i = 10 ÷ 4 ÷ 100 = 0.025 n = 4 X 1.5 = 6 Calculate for the answer: $2874.48 How much interest is earned for this investment? $174.48

  7. Donald borrows $1200 from an electronics store to buy a computer. He will repay the loan in equal monthly payments over 3 years, starting 1 month from now. He is charged interest at 12.5% per year compounded monthly. How much is Donald’s monthly payment? N = 36 I% = 12.5 PV = 1200 PMT = -40.144 FV = 0 P/Y = 12 C/Y = 12 Therefore Donald’s monthly payment is $40.14.

  8. Sherri borrows $9500 to buy a car. She can repay her loan in 2 ways. The interest is compounded monthly.Option A: monthly payments for 3 years at 6.9% per yearOption B: monthly payments for 5 years at 8.9% per yeara) Determine the monthly payment under each option:b) Give a reason Sherri might choose each option. N = 36 I% = 6.9 PV = 9500 PMT = -292.90 FV = 0 P/Y = 12 C/Y = 12 Option 2: answer: $196.74 Option A: pay less total interest Option B: monthly payments are smaller

  9. What is an RRSP?What is an RESP?Why would you save using them?

  10. Jane and Jim buy a house for $170 000 and put a 20% down payment on the house. How much is their mortgage for? .20 X 170 000 = $34 000 down paymentMortgage: 170 000 – 34 000 = 136 000 Calculate their monthly payments if they have a mortgage rate of 5% compounded semi-annually for a 5 year term and it is amortized over 25 years. N = 25 X 12 = 300 I% = 5 PV = 136000 PMT = -790.98 FV = 0 P/Y = 12 C/Y =2 Therefore: Jim and Jane’s regular monthly payment would be $790.98

  11. Answer true or false for each statement: • A mortgage is a loan that is used to buy property. • An annuity always has a regular payment. • In a mortgage the payment period is always the same as the compounding period. • The present value of an annuity is the amount in the bank after you have invested for a specified amount of time. • The number of payment periods (“N” on the TVM) is calculated by multiplying the number of years by the payments per year. • The interest paid for an annuity when you borrow money is the difference between the total amount you paid and the amount you borrowed.

  12. Angela and Ed acquire a mortgage of $210 000 at 4% per year compounded semi-annually with an amortization of 25 years and a 5 year term. Explain what this means in your own words.

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