Calculate how long it would take to save up

Reference no: EM133734655

Question 1. I want you to calculate how long it would take to save up for the down payment on a place to live. To do this, first, find a house/condo that is on the market and use the listing price as the cost of the house. Second, figure out how much you would need to have to purchase the house if you want to have a 10% down payment and an additional 5% of the loan amount for closing costs. Third, use the current 1-year t-bill rate of 5.06% as the amount you can earn per year on an investment. I want you to provide your calculation for how long it would take for you to have enough money for the down payment and closing costs. Then, you can address if t-bills are what you would choose to invest in, and if not, mention some details about an alternative investment you could make.

Question 2. The Truth in Lending Act causes the lender to quote the APR to the borrower. As we learned in Chapter 6, the APR and EAR are different if interest compounds on a time interval that is less than a year. APR, which is the rate you are told you are paying, will be lower than the EAR, the rate you will actually pay.To see this, I want you to calculate the EAR for a credit card based on the APR that is stated by the credit card company. To be able to find the information you need, search for the "terms and conditions" for a particular credit card. You will most likely find a range for the APR. You can use either the low-end or high-end number in your calculation. Then, find out how often interest is charged on the unpaid balance. It will most likely be a "daily balance method" meaning that you will be charged interest every day on your unpaid transactions and unpaid interest from previous days. Use that information, with the formula from Chapter 6, to calculate the EAR you are being charged for that credit card.Finally, explain the difference between the APR and EAR you calculated, and how that affects you, the borrower.

Reference no: EM133734655

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