High School

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Question 1


In 3 years you want to have $5000 in the bank, if the interest rate was 8%, how much do you need now?


Question 2


You currently have $5000 in the bank, and you plan on keeping it in the bank for 10 years at an interest rate of 5%, how much will you have in 10 years?


Question 3


You currently have a student loan for $12,000 at a 6% interest. You currently pay $222.00 a month and interest compounds 12 times per year. How long will it take you to pay off your loan?


Question 4


You currently have a loan for $5000 due in 60 months with interest compounded monthly. You pay a monthly payment of $93.22. What interest are you paying?


Question 5


You currently have a loan of $6000 at 4.5% for 5 years compounding monthly. What is your monthly payment?


Question 6


What deposit today would you have to make at your bank at a rate of 8% if you wanted to witthdrawal $100 each year for 5 years?


Question 7


Assume that you are planning on retirement in 30 years. If you deposit $5,500 at the end of each year into an RRSP that will earn an average of 7.5% per year, how much will you have after 30 years?


Question 8


a. You are looking at buying a house and have a maximum budget of $1315 per month. The house you really like is $300,000 and current interest rates are 5% over 25 Years. Can you afford this house?


b. How much of a down payment would you have to put dow to be able to afford this house?


Question 9 :


You are looking to save $30,000, you currently have $5000 in the bank and plan on saving an additional $300 per month until you have the $30,000. You are going to get an interest rate of 5%. How long will it take you to save $30,000?

Answer :

1, You need to save $3965.65 now.

2. You will have $8144.71 in 10 years.

3. It will take approximately 78 months or 6 years and 6 months to pay off the loan.

4. The interest rate is 1.203%.

5. Your monthly payment is $111.12.

6. The deposit required is $375.85.

7. You will have $724,380.22 after 30 years.

8. You need to put a down payment of $60,000.

9. It will take approximately 80 months or 6 years and 8 months to save $30,000.

Question 1Given,Amount that you want to have in the bank at the end of 3 years = $5000Rate of interest = 8%Let the amount required now be A.Present value of future amount = A = FV / (1 + i)ⁿwhere,FV = Future value = $5000i = Rate of interest per year = 8% = 0.08n = Number of years = 3A = 5000 / (1 + 0.08)³= 5000 / 1.259712= $3965.65.

Question 2Given,Amount you currently have = $5000Time period = 10 yearsInterest rate = 5%Let the amount you will have in 10 years be A.P = $5000i = 5% = 0.05n = 10 yearsA = P (1 + i)ⁿ= 5000(1 + 0.05)¹⁰= $8144.71

Question 3Given,Principal amount (P) = $12,000Interest rate (R) = 6% = 0.06Monthly interest rate (r) = R / 12 = 0.06 / 12 = 0.005Number of times interest is compounded in a year (n) = 12Monthly payment = $222Using the formula for calculating the number of payments of a loan: PMT = r * (P/(1-(1+r)^(-n)))222 = 0.005 * (12000/(1-(1+0.005)^(-n)))=> (1+0.005)^(-n) = 1 - (222/(0.005 * 12000))=> (1+0.005)^(-n) = 0.7285=> -n = log(0.7285) / log(1.005)=> n = (-1 * log(0.7285)) / log(1.005)≈ 77.32.

Question 4Given,Loan amount (P) = $5000Monthly payment (M) = $93.22Time period (t) = 60 monthsLet the interest rate be r.Using the formula for the present value of a loan: P = M * ((1 - (1+r)^(-t))/r)=> 5000 = 93.22 * ((1 - (1+r)^(-60))/r)=> (1 - (1+r)^(-60))/r = 53.60Solving the above equation for r using trial and error or using a financial calculator, we get:r = 1.203%

Question 5 Given, Loan amount (P) = $6000Interest rate (R) = 4.5% = 0.045Time period (t) = 5 years = 60 monthsLet the monthly payment be M.Using the formula for the monthly payment of a loan: M = (P*r*(1+r)^t)/((1+r)^t - 1)=> M = (6000 * 0.00375 * (1.00375)^60) / ((1.00375)^60 - 1)=> M = $111.12.

Question 6 Given, Amount you want to withdraw annually = $100Let the deposit required be A.Rate of interest = 8%Time period (t) = 5 years using the formula for the present value of an annuity: A = (R * (1 - (1 + r)^(-t)))/rwhere,R = Annual withdrawal amount = $100r = Rate of interest per year = 8% = 0.08n = Number of years = 5A = (100 * (1 - (1 + 0.08)^(-5)))/0.08= $375.85.

Question 7Given,Annual deposit = $5,500Rate of return = 7.5%Number of years = 30Using the formula for the future value of an annuity: FV = P * ((1 + r)^n - 1)/rwhere,P = Annual deposit = $5,500r = Rate of return per year = 7.5% = 0.075n = Number of yearsFV = 5500 * ((1 + 0.075)^30 - 1)/0.075= $724,380.22.

Question 8a) Given, Maximum budget per month = $1315Cost of the house = $300,000Interest rate per year = 5% = 0.05Time period = 25 years = 300 months let the monthly payment be M.Using the formula for the monthly payment of a loan: M = (P*r*(1+r)^t)/((1+r)^t - 1)where,P = Loan amount = $300,000r = Monthly interest rate = 0.05 / 12 = 0.00417t = Time period in months = 25 * 12 = 300M = (300000 * 0.00417 * (1.00417)^300)/((1.00417)^300 - 1)= $1748.47As the maximum budget per month is $1315, you cannot afford this house.b) Down payment = 20% of the cost of the house = 0.2 * $300,000= $60,000.

Question 9 Given, Amount to be saved = $30,000Amount currently in the bank = $5000Monthly deposit = $300Interest rate per year = 5% = 0.05Let the time period required to save the amount be n.Using the formula for the future value of an annuity: FV = P * ((1 + r)^n - 1)/where,P = Monthly deposit = $300r = Rate of interest per year = 5% / 12 = 0.00417n = Time periodFV = 300 * ((1 + 0.00417)^n - 1)/0.00417=> (1 + 0.00417)^n = (300 * 0.00417 + 1)/(5000 * 0.05 + 300 * 0.00417)=> n = log((300 * 0.00417 + 1)/(5000 * 0.05 + 300 * 0.00417))/log(1.00417)≈ 79.33.

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