Chapter 5, Solutions Cornett, Adair, and Nofsinger

Use equation 5-9:

If you only paid interest over the length of the loan and your principal balance was repaid at the end of the 36 months, your payment would be $91.67 per month (= $10,000×0.11÷12) for interest only and you would owe $10,000 at the end of the 36 months, too.

LG105-37 Number of Annuity Payments Joey realizes that he has charged too much on his credit card and has racked up $5,000 in debt. If he can pay $150 each month and the card charges 17 percent APR (compounded monthly), how long will it take him to pay off the debt?

Rewrite equation 5-9 in terms of N:

LG105-38 Number of Annuity Payments Phoebe realizes that she has charged too much on her credit card and has racked up $6,000 in debt. If she can pay $200 each month and the card charges 18 percent APR (compounded monthly), how long will it take her to pay off the debt?

Rewrite equation 5-9 in terms of N:

Advanced

Problems5-39 Future Value Given a 8 percent interest rate, compute the year 7 future value if deposits of $1,000 and

LG1$2,000 are made in years 1, and 3, respectively, and a withdrawal of $500 is made in year 4.

Use equation 5-1:

FV = $1,000 × (1 + 0.08)6 + $2,000× (1 + 0.08)4 - $500× (1 + 0.08)3 = $1,586.87 + $2,720.98 – $629.86 = $3,677.99