Statements about fixed rate mortgage

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Reference no: EM131568246

1. An investment will pay $150 at the end of the first year, $200 at the end of the year 2, $300 at the end of year 3, and $350 at the end of year 4. If other investments of equal risk earn 7 percent annually, what is its present value?

2. You want to buy a car and have to finance $30,000. The loan will be fully amortized over 5 years and the nominal interest rate will be 4% with monthly payments. What will be the monthly loan payment?

3. If you invest $5,000 today at a 7% interest rate compounded annually, how many years will it take for your investment to grow to $10,000?

4. Your bank account pays a 6% nominal interest rate that is compounded quarterly. What is the effective interest rate?

5. What interest rate must you earn if you currently have $10,000 and want $30,000 in 10 years?

6. Which of the following statements about a fixed rate mortgage is NOT correct?

a. The amount of the payment that is applied to principal and interest is fixed over time.

b. The amount of the payment that is applied to interest decreases over time.

c. The payment is fixed over the life of the loan.

d. The amount of the payment that is applied to principal increases over time.

Reference no: EM131568246

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