(Questions 8-9). If Melody wants to purchase a house for $220,000 and finance $110,000 with either a 3.8%, 30-year mortgage or a 4.5%, 20-year mortgage.

8.What is the effective interest rate on each of the above alternatives?

Note: Only compare the interest rates for the above two options based on monthly compounding. Please use four decimals.

A.

B.

9.Which alternative would you recommend and why?

10. What would be the value of a savings account started with $76,000, earning 5.5 percent (compounded annually) after 8 years?

11. What would be the value of a savings account started with $4,300, earning 2.5 percent (compounded annually) after 10 years?

(For questions 13-16). How much would you have to invest today to receive

12. $25,000 in 8 years at 9 percent compounded semiannually

13. $35,000 in 12 years at 10 percent compounded quarterly

14. $45,000 in 13 years at 11 percent compounded monthly

15. $55,000 in 15 years at 12 percent compounded daily