1. Which is a better investment: 3% compounded annually or 2.92% compounded daily?
2. Ms. Smith deposits $200 at the end of each month into a bond fund yielding 3% interest compounded monthly. How much are her holdings worth after 5 years?
3. A real estate investor takes out a $200,000 mortgage subject to the following terms: For the first 5 years, the payments will be the same as the monthly payments on a 15-year mortgage at 4.5% interest compounded monthly. The unpaid balance will then be payable in full.
(a) What are the monthly payments for the first 5 years?
(b) What balance will be owed after 5 years?