1. Allen deposits $48 at the beginning of each month into a savings
account earning 6.1% interest compounded monthly.
a) how much will be in the account after three years?
b) when will the account balance reach $7000 (years and months, to
the nearest month)?
2. Barbara has decided to set $12,000 aside now in a travel savings account to use for special trips when she retires. If the account earns 10% interest and she plans to make 5 equal withdrawals, a year apart, starting 20 years from now, how large will each withdrawal be?
3. Hank borrowed $1230 from his brother-in-law Jed and agreed to pay interest at a 6% annual rate. If he paid back $400 after one year and $500 after the second year, how much did he have to pay back at the end of the third year to pay off the debt in full?
4. Mary’s Visa account shows the following transactions. Construct the
running totals and find the average daily balance.
Date Transaction
Amount Balance
April 5 Beginning balance
$234.60
April 9 Rio Grande
$ 25.69
April 15 Payment to account
$ 56.20
May 2 Gilsdorf Garage
$165.30
May 5 End of billing period
5. Bart’s Visa account shows a billing period of 30 days, an average daily balance of $512.68, and an annual interest rate of 17.1%. How much interest is owed if the balance is not paid in full?
6. Melinda has a $130,000 20-year mortgage at 7.8% interest.
a) What is Melinda’s monthly payment?
b) How much does Melinda still owe after paying on her mortgage for
10 years?
c) If the closing costs are $1,230 (fixed) plus 2 points, what are
the total closing costs?
7. Jack has a $153,000 25-year mortgage at 8.2%. After paying on the mortgage for 15 years, he sees that interest rates are down to 7.1% on new mortgages. What would the monthly payments on a new 7.1% mortgage be, if the costs of doing the new mortgage are $3125 and he wants to have the new mortgage end the same time the old one would have ended (i.e. after 10 more years)?
8. Henry can buy a 20-year term life policy for $430 per year or a whole
life policy for the same face amount for $900 a year. If the whole life
policy builds a cash value of $21,200 after 20 years:
a) what is the annual yield on the investment portion of the whole
life policy?
b) which policy would you advise Henry to get? Give reasons for and
against your choice.
9. Jill bought 600 shares of Conseco stock, whose listing in the newspaper is shown below.
Div. Yld. 100s High
Low Close Chg.
Conseco
.60 2.8 29489 22.88 21.25
21.50 -1.38
a) If she bought her shares at the closing price from a broker who charges
a flat $20 fee per transaction, what total amount did she pay?
b) Assuming that Conseco pays dividends quarterly, how large a dividend
check does Jill receive each quarter?
c) If Jill sells the shares at $28.40 after two years, at the same
broker where she bought them, what is her yield on this stock
investment?