Considering the advantages of quitting that habit

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Reference no: EM131965945

1. Cassidy Hemlock spends $80 a month on doughnuts and coffee and is considering the advantages of quitting that habit. If Cassidy just turned 22 and deposits the $80 at the end of each month into a savings plan earning 5.85% compounded monthly, how much will she have in her savings plan at age 75, after her final deposit?

a. $346,994.26

b. $345,310.87

c. $50,880

d. $310,643.10

2. Suppose a homeowner purchased a home for $500,000, with 100% financing at 5 percent for 15 years. Payments are made yearly at the end of each year. It seems to me that the payments at the end of each year would be $48,171 (at least close). After one year, the homeowner will still owe a principal of $476,829 if I did it correctly. The raw payments for the remaining 14 years would be 14 x $48,171 = $674,394. Some present value factors are: Present value of an annuity periods 4% 5% 14 10.5631 9.8986 15 11.1184 10.3797 Refinancing the principal at 4% for 14 years will result in lower payments. How much will the new payments be when the homeowner refinances at 4%?

$48,171

45,141

$42,886

$45,939

Reference no: EM131965945

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