1. You need to pay $100,000 in five years from now. You talk to your bank, and they will give you an interest rate of 3% per annum on money you deposit today. How much money do you need to invest today in order to meet the required future payment,

a) if the bank compounds annually?

b) if the bank compounds monthly?

c) if the bank compounds continuously?

2. You have just closed on a new house. The price of the home is $250,000. What would be your monthly payment if you can secure a 30-year mortgage at 9% compounded monthly?

3. You have $100 that you can invest in the market at a rate of 15% compounded annually. How much money will you have in 15 years?

4. If you take out a loan with an annual interest rate of 7%, what is the effective annual rate if the interest is compounded,

a) annually?

b) semi-annually?

c) monthly?

5. One and half years from today, you would like to buy a new car that requires a down payment of $5,000.

a) How much do you have to save today assuming Bank A is offering a nominal interest rate of 3.2% with quarterly compounding?

b) If Bank B is advertising a special rate 3.6% with semiannual compounding. Should you switch your account to bank B?

6. You are buying a new home and you can only afford monthly payments of $2000. The current APR is 7.9%. How large of a loan can you afford if the term is:

a) 20 years?

b) 30 years?