1. A man deposits $1200 2000 and $4000 at the end of 1 2 and 3 years respectively
at 10% interest per year. What will be the balance accumulated at the end of 6 years?
2. A perspective homebuyer wants to finance the purchase of a house costing $150000
over a period of 15 years. If the interest is 6 percent per year what will be a) the
annual payment and b) the monthly payment?
3. A bank offers the following interest rates: a) 6% compounded annually; b) 5.9%
compounded semiannually; c) 5.8 compounded quarterly d) 5.5% compounded
monthly; e) 5.45% compounded continuously. Which rate would you select to
provide the highest return?
4. The maintenance for a bus whose life is 10 years is $1500 per year starting the
fourth year increasing by $200 for each successive year. The interest rate is 5% per
year. What is the present worth of maintenance cost?
5. Assume you want to borrow $5000 to pay for a vehicle. The annual interest rate that
a bank (or loan department at an auto dealer) charges will depend on the age of the
vehicle you wish to buy and also on your credit history. Some banks will not even
make loans for vehicles that are more than seven years old. To be prepared for
negotiations with the auto dealer or bank (although there is not much room for
negotiations with a bank) prepare a table of the monthly payments for the loan
amount of $5000 at the following annual interest rates (4 5 6 7 8 9 10 11 12 13
14 16 28 20 percent) and for three different repayment periods (24 36 and 48
months). In addition calculate the total amount of money re-paid and also the total
amount of interest at each interest rate for each period.
Create two plots:
a) Monthly Payment ($) vs. Annual Interest Rate (Percent); Use a scatter plot and
show each payment period (24 36 and 48 months) as a separate series on the plot.
Be sure to completely label your plot.
b) Total Interest Paid ($) vs. Annual Interest Rate (Percent); Use a scatter plot and
show each payment period (24 36 and 48 months) as a separate series on the plot.
Be sure to completely label your plot