Problem 1 (20 points):

Your grandfather put some money in an account for you on the day you were born. You are now 18 years old and are allowed to withdraw the money for the first time. The account currently has $3996 in it and pays an 6% interest rate.

a. How much money would be in the account if you left the money there until your 35th birthday?

b. What if you left the money until your 60th birthday?

c. How much money did your grandfather originally put in the account?

Exercise 3 (40 points):

You are thinking of purchasing a house. The house costs $250,000. You have $20,000 in cash that you can use as a down payment on the house, but you need to borrow the rest of the purchase price. The bank is offering a 20-year mortgage that requires annual payments and has an interest rate of 6% per year. What will your annual payment be if you sign up for this mortgage?