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Final Exam Review III Unit 5 (annuities & mortgages)

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Key Concepts I can identify various financial situations as present value or future value and calculate present value, future value, or payment using the appropriate formula. I can perform financial calculations using the TVM Solver function on the TI-nspire graphing calculator. I can describe various types of mortgages (open vs closed and fixed vs variable) I can describe the different aspects of a mortgage, such as amortization period, interest rate, and payment frequency. I can explain how the total interest paid will be affected by adjusting any of these three factors. I can read and interpret an amortization table

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Practice Problem 1 Alesha is saving for a new computer. She deposits $100 at the end of each month into an account that earns 4% per year compounded monthly. Determine the amount in the account after 3 years How much would be in the account if she increased her deposit to $150 per month?

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Practice Problem 2 Alex’s parents set up an annuity to help him with college expenses. The annuity will allow him to withdraw $300 every 2 weeks for 4 years, beginning 2 weeks from now. If the account ears 3.5% compounded bi-weekely, what principal should Alex’s parents invest?

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Practice Problem 3 Charlene finances a car loan of $18 000 at 9.9% per year compounded monthly. She can repay the loan in 36 months or 48 months, starting 1 month from now. Calculate her monthly payment in each case How much interest does she save by repaying the loan in 36 months instead of 48?

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1 Chapter 05 Time Value of Money 2: Analyzing Annuity Cash Flows McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

1 Chapter 05 Time Value of Money 2: Analyzing Annuity Cash Flows McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

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