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4) Suppose that your current credit card bill is $2,408 with an interest rate of 14.9%. Your required minimum payment is $30 per month. a) Using a regular payment of $30 per month, make an amortization schedule for the first 4 months only of the loan. b) Now calculate how long (the total time) it would take you to pay off the whole bill at that rate ($30 per month payments). c) Looking at the first line of your amortization schedule, which specific number(s) give you a clue that this loan will take a LONG time

4) Suppose that your current credit card bill is $2,408 with an interest rate of 14.9%. Your required minimum payment is $30 per month. a) Using a regular payment of $30 per month, make an amortization schedule for the first 4 months only of the loan. b) Now calculate how long (the total time) it would take you to pay off the whole bill at that rate ($30 per month payments). c) Looking at the first line of your amortization schedule, which specific number(s) give you a clue that this loan will take a LONG time

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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= 3:31 Question 4) Suppose that your current credit card bill is $2,408 with an interest rate of 14.9%. Your required minimum payment is $30 per month. a) Using a regular payment of $30 per month, make an amortization schedule for the first 4 months only of the loan. b) Now calculate how long (the total time) it would take you to pay off the whole bill at that rate ($30 per month payments). c) Looking at the first line of your amortization schedule, which specific number(s) give you a clue that this loan will take a LONG time to payoff? Explain d) In the end, how much total will you end up paying back for the $2,408 loan? e) f) If you decide to add just $15 to your payment (pay $45 per month instead of the minimum $30 required), find the time it would take you to pay off the bill. Answer Bottom line what effect did your slightly increased payment have? (How much will you have saved in total interest if you make the $45 payments?) Solve the problems step by step and get these answers for each one 4a ? 4b 38.5 years 4c explanation don't solve it just explain 4d $13,850 4e 7.4 years 4f $9,864
Transcribed Image Text:= 3:31 Question 4) Suppose that your current credit card bill is $2,408 with an interest rate of 14.9%. Your required minimum payment is $30 per month. a) Using a regular payment of $30 per month, make an amortization schedule for the first 4 months only of the loan. b) Now calculate how long (the total time) it would take you to pay off the whole bill at that rate ($30 per month payments). c) Looking at the first line of your amortization schedule, which specific number(s) give you a clue that this loan will take a LONG time to payoff? Explain d) In the end, how much total will you end up paying back for the $2,408 loan? e) f) If you decide to add just $15 to your payment (pay $45 per month instead of the minimum $30 required), find the time it would take you to pay off the bill. Answer Bottom line what effect did your slightly increased payment have? (How much will you have saved in total interest if you make the $45 payments?) Solve the problems step by step and get these answers for each one 4a ? 4b 38.5 years 4c explanation don't solve it just explain 4d $13,850 4e 7.4 years 4f $9,864
5) Imagine that a family just secured a loan for their new home with the following terms: Loan amount: $160,000 Interest rate: 7% Length of loan: 30 years Regular Monthly payments: $1064.48 (that is "R" already calculated for you!) The wife, a sharp former MATH 170 student, suggests that if they make payments of HALF their regular monthly payments every two weeks (instead of a full payment once per month), they would pay off the loan much more quickly and save A LOT of money overall. Find the total amount they would save if they did this. Hints (follow these steps): Find the half payment (one half of R that's given!!). If payments are every two weeks, what is n (how many two weeks periods are there in one year?). Use those terms (new R and n) and solve for time. Now find total payments in this case (Rnt), and compare to original loan's total payments. Solve the problem step by step and get these answers R=$532.24 n=26 t=23.7 years, savings = 55,138
Transcribed Image Text:5) Imagine that a family just secured a loan for their new home with the following terms: Loan amount: $160,000 Interest rate: 7% Length of loan: 30 years Regular Monthly payments: $1064.48 (that is "R" already calculated for you!) The wife, a sharp former MATH 170 student, suggests that if they make payments of HALF their regular monthly payments every two weeks (instead of a full payment once per month), they would pay off the loan much more quickly and save A LOT of money overall. Find the total amount they would save if they did this. Hints (follow these steps): Find the half payment (one half of R that's given!!). If payments are every two weeks, what is n (how many two weeks periods are there in one year?). Use those terms (new R and n) and solve for time. Now find total payments in this case (Rnt), and compare to original loan's total payments. Solve the problem step by step and get these answers R=$532.24 n=26 t=23.7 years, savings = 55,138
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