SECTION I: LOANS

1. Several years after graduation you decided to buy a condo for $235,000.

a.

Assuming you need 15% down-payment which you have saved, what is the

amount of the loan you need to borrow?

b. Given your calculation in part a, what will your monthly mortgage payment be

assuming a 30 years mortgage at 4.75%?

c. What is the total amount you end up paying including principal and interest?

d.

For comparison purposes, you also look at a 15-year mortgage at 4.5% for 15 years.

What is your monthly payment?

e.

What is the total amount you end up paying including principal and interest if you

decide on the 15-year mortgage?

f.

Which loan is better,

30 years at 4.75% or 15 years at 4.5%?

Explain.

2.

You are paying off your student loans!

You have $ 60,000. You borrowed at an

An annual interest rate of

3.66%.

a. Assume you will pay the loan back in 20 years. Make an amortization table and paste

the top 5 rows in your word document.

b. What is your monthly payment?

What is the total interest you will have paid to the

lending institution at the end of your loan?

c. Assume you will pay the loan back in 12 years. Make a new amortization table and

paste the top 5 rows in your word document.

d. What is your new monthly payment?

What is the new total interest you will have paid

to the lending institution at the end of your loan?

e. Assuming you can afford to make either monthly payment, which option is a better

financial decision? The 20 year loan or 12 year loan?

SECTION II: CREDIT CARDS

3.

You bought a brand new TV and surround sound system, and charged a total of

$3700 on your credit card. Your credit card has an annual interest rate of 16.99%. Your

bank's terms for minimum payment is either 2% of your balance or $25, whichever is the

larger amount. (Assume that you had no prior balance on the card and that you will not

make any additional charges on the card)

a. Assume you decide to make the minimum payment. How long will it take for you to

pay the loan off?

b. Under the minimum payment option, what is the total interest you pay to the bank?

c. Assume you decide to make a flat payment of $100 each month to pay this debt.

How long will it take for you to pay the loan off?

d. Under the $100 monthly flat payment option, what is the total interest you pay to the

bank?

e. Assume you decide to pay off this debt in 3 years. What is your monthly payment

amount?

f. Under the 3 years fixed duration payment option, what is the total interest you pay to

the bank?

g. Of the three payment options, if you can afford to do anyone of these, which one is

the best financial decision?