The Timeline

You have just taken out a five$-$year loan from a bank to buy an engagement ring. The ring

costs $$6000.$ You plan to put down $$2000$ and borrow $$4000.$ You will need to make annual

payments of $$1250$ at the end of each year. Show the timeline of the loan from your perspec$-$

tive. How would the timeline differ if you created it from the bank's perspective?

You currently have a four$-$year$-$old mortgage outstanding on your house. You make monthly

payments of $$2000.$ You have just made a payment. The mortgage has $26$ years to go $($i$.$e$.,$ it

had an original term of $30$ years$).$ Show the timeline from your perspective. How would the

timeline differ if you created it from the bank's perspective?

The Three Rules of Time Travel

Calculate the future value of $$4000$ in

a$.$ Three years at an interest rate of $6\%$ per year.

b$.$ Six years at an interest rate of $6\%$ per year.

c$.$ Three years at an interest rate of $12\%$ per year.

d$.$ Why is the amount of interest earned in part $($a$)$ less than half the amount of interest earned

in part $($b$)?$

What is the present value of $$13,000$ received

a$.$ Ten years from today when the interest rate is $4\%$ per year?

b$.$ Twenty years from today when the interest rate is $8\%$ per year?

c$.$ Five years from today when the interest rate is $2\%$ per year?

Your brother has offered to give you either $$60,000$ today or $$100,000$ in $12$ years. If the

interest rate is $6\%$ per year, which option is preferable?

Consider the following alternatives:

i$.$ $$140$ received in one year

ii$.$ $$230$ received in five years

iii. $$320$ received in ten years