2. You and your dog Theodore II have found a home to buy that is selling for $90
ID: 2638891 • Letter: 2
Question
2.
You and your dog Theodore II have found a home to buy that is selling for $90,000: you will put down $20,000 and obtain a 30-year fixed-rate mortgage at 10% for the remainder. How much interest will you pay (in dollars) over the life of the loan? (Assume you make each of the required 360 payments on time.)
$208,631
$190,056
$151,148
$206,512
$130,586
3.
What is the present value of a stream of ten $1,000 payments that start today? Assume an interest rate of 6.5%.
$7,069.13
$7,093.62
$7,656.10
$7,914.10
$8,165.12
4.
You receive 4 payments of $450 per year that start 2 years from now. What is the present value of these payments today given an 9% discount rate?
$1,405.71
$1,231.49
$1,337.50
$1,487.18
5.
You are considering buying a 10 year annuity for $650. The rate of return is 6.5%. What annual cash flow from the annuity will you receive?
$ 90.42
$102.96
$104.33
$114.31
$129.27
6.
What is the present value of a stream of ten $1,000 payments that start today? Assume an interest rate of 6.5%.
$7,069.13
$7,093.62
$7,656.10
$7,914.10
$8,165.12
2.
You and your dog Theodore II have found a home to buy that is selling for $90,000: you will put down $20,000 and obtain a 30-year fixed-rate mortgage at 10% for the remainder. How much interest will you pay (in dollars) over the life of the loan? (Assume you make each of the required 360 payments on time.)
$208,631
$190,056
$151,148
$206,512
$130,586
3.
What is the present value of a stream of ten $1,000 payments that start today? Assume an interest rate of 6.5%.
$7,069.13
$7,093.62
$7,656.10
$7,914.10
$8,165.12
4.
You receive 4 payments of $450 per year that start 2 years from now. What is the present value of these payments today given an 9% discount rate?
$1,405.71
$1,231.49
$1,337.50
$1,487.18
5.
You are considering buying a 10 year annuity for $650. The rate of return is 6.5%. What annual cash flow from the annuity will you receive?
$ 90.42
$102.96
$104.33
$114.31
$129.27
6.
What is the present value of a stream of ten $1,000 payments that start today? Assume an interest rate of 6.5%.
$7,069.13
$7,093.62
$7,656.10
$7,914.10
$8,165.12
Explanation / Answer
1> Effective Annual Rate=((1.05)^2-1)*100 10.25 2> Loan Amount=(90000-20000) (A) 70000 Interest Factor=F=(1.10)^30 17.45 Capital Recover/Year=A=P(F*i)/(F-1)=70000*(17.45*0.1)/(17.45-1) 7425.53 Amount paid in 30 Years=30*7425.53 (B) 222765.9 Interest Paid=B-A 152765.9 4> PV=450/(1.09^2)+450/(1.09^3)+450/(1.09^4)+450/(1.09^5) 1337.499 5> Interest Factor=F=1.065^10 1.877 PV of Annuity=A*(F-1)/(F*i)=A*(1.877-1)/(1.877*0.065)7.188A 7.188 7.1881A=650 A=650/7.188 90.43 3>Question is incomplete
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