Project #1613 - Amortization Exercise

Applied Exercise

1. You find that a small business loan in the amount of 50,000 is the amount you need to purchase the restaurant location. After researching banks to find the best interest rate, you find that banks for small businesses offer the best interest rate of 9% interest that compounds monthly for 7 years.

a. What is the monthly payment for this loan?
b. Show the formula that you used and the values used for each variable to calculate the monthly payment.
c. What is the unpaid balance of the loan at the end of the 1st year?
d. Show the formula that you used and the values used for each variable to calculate the unpaid balance at the end of the 1st year.
e. What is the unpaid balance at the end of the 6th year? Show the formula that you used and the values used for each variable to calculate the unpaid balance at the end of the 6th year.

2. Diane works at a public university. She contributes $625 at the end of each month to her retirement fund. For the past 10 years, this fund has returned 3.84% a year, compounded monthly.

a. Assuming the 3.84% rate continues, how much will she have in her retirement account after 15 years?

b. Assume the economy has gotten better and that the fund now has a return of 7.72% compounded monthly. Since Diane’s salary has risen over the first 15 years, she can now contribute $1000 per month. At the end of the next 15 years, how much is her account worth?

 

Subject Mathematics
Due By (Pacific Time) 12/23/12
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