Posted: November 17th, 2015

Finance Homework

Finance Homework

1. Home loans typically involve points, which are fees charged by the lender. Each point charged means

that the borrower must pay 1% of the loan amount as a fee. For example, if the loan is for $180,000 and 4

points are charged, the loan repayment schedule is calculated on a $180,000 loan but the net amount the

borrower receives is only $172,800. Assume the interest rate is .75% per month. What is the effective annual

interest rate charged on such a loan, assuming loan repayment occurs over 264 months? (Do not round

intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. 2. Home loans

typically involve points, which are fees charged by the lender. Each point charged means that the

borrower must pay 1% of the loan amount as a fee. For example, if the loan is for $180,000 and 4 points are

charged, the loan repayment schedule is calculated on a $180,000 loan but the net amount the borrower

receives is only $172,800. Assume the interest rate is .75% per month. What is the effective annual interest

rate charged on such a loan, assuming loan repayment occurs over 264 months? (Do not round intermediate

calculations. Enter your answer as a percent rounded to 2 decimal places. 3. A couple will retire in 50

years; they plan to spend about $36,000 a year in retirement, which should last about 25 years. They believe

that they can earn 8% interest on retirement savings.If they make annual payments into a savings plan, how

much will they need to save each year? Assume the first payment comes in 1 year. (Do not round intermediate

calculations. Round your answer to 2 decimal places.)

a. Annual payment =

b. How would the answer to

part (a) change if the couple also realize that in 20 years they will need to spend $66,000 on their child college education? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

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