E INV 1 AM 11
INTEREST
Name:_________________
There are two types of Interest : ____________________ and _____________________.
SIMPLE INTEREST
The formula is ________________
I is _____________________________________________________________________
P is ____________________________________________________________________
r is _____________________________________________________________________
t is _____________________________________________________________________
NOTE: For 8% use r = _____, for 12% use r = _____, for 2.5% use r = _____
NOTE: For 6 months use t = _____ (half a year), for 1 month use t = _____ = _____
For 3 months use t = _____. For 1 day use t = _____.
NOTE: Per annum means ______________. It is sometimes written as p.a.
EXAMPLE:
What is the simple interest on $500 @ 5% p.a. for 3 years?
What is the total amount after this time?
SOLUTION:
___________________________________
Simple Interest =
____________
The total amount is ___________________________________
Total Amount =
____________
QUESTIONS FOR STUDENTS:
Students should do INVESTIGATION 1: Simple Interest on page 250 from the text. In
each part of this Investigation students should write down what they multiply to get their
answers. Students should also calculate the Total Amount for each calculation. Fill in the
answers below:
1. 1 year
Interest______________ Total Amount_____________
2. 2years
Interest______________ Total Amount_____________
5years
Interest______________ Total Amount_____________
10years
Interest______________ Total Amount_____________
3. 6months
Interest______________ Total Amount_____________
3months
Interest______________ Total Amount_____________
1month
Interest______________ Total Amount_____________
4. 40days
Interest______________ Total Amount_____________
COMPOUND INTEREST
With Compound Interest the interest is added onto the principal after every calculation
period. Look at the example below.
EXAMPLE:
What is the Total Amount earned if $1000 is invested at 8% p.a. compounded 4 times a
year for 1 year? What is the Interest?
NOTE: 8% per year must be considered as ___________________________ per period.
Fill in the table below:
Period
Principal
Rate per
period 2%
Interest
Amount
1
2
3
4
ANSWER: The Amount after 1 year is __________.
The Interest must be ________________
NOTICE:
a)
__________________________________________________________________
__________________________________________________________________
b)
__________________________________________________________________
__________________________________________________________________
c)
__________________________________________________________________
__________________________________________________________________
d)
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
QUESTIONS FOR STUDENTS
1. Give the rate per period and the decimal to be used for the following:
(The first one is done for you.)
Decimal 0.03
a) 12% , 4 times a year
Rate per period 12/4 = 3%
b) 16% , 2 times a year
Rate per period____________ Decimal________
c) 6% , 3 times a year
Rate per period____________ Decimal________
d) 10% , 4 times a year
Rate per period____________ Decimal________
e) 5% , 4 times a year
Rate per period____________ Decimal________
f) 10% , 12 times a year
Rate per period____________ Decimal________
g) 10%, every month
Rate per period____________ Decimal________
2. Calculate the number of periods for the following: The first is done for you.
a) 4 times a year for 6 years
Number of periods
b) 12 times a year for 2 years
Number of periods _____________
c) 3 times a year for 4 years
Number of periods _____________
d) Twice a year for 8 years
Number of periods _____________
e) Every month for 5 months
Number of periods _____________
f) Every month for 5 years
Number of periods _____________
g) Every day for 1 year
Number of periods _____________
NOTE: There are special names given for certain periods.
Every three months = 4 times a year is called QUARTERLY
Every six months = 2 times a year is called SEMIANNUALLY
Every year once a year is called ANNUALLY
Every month = 12 times a year is called MONTHLY
4 x 6 = 24
3. Fill in the following tables to calculate the Amount and Interest for the following
questions. (Follow the example from compound interest.)
a) Invest $2000 @ 12% p.a. compounded 2 times a year (semi-annually) for 2 years.
Period
Principal
1
2000
Rate
6%
0.06
Interest
Amount
2
3
4
Amount _________________
Interest_________________
b) Invest $ 10 000 @ 12% p.a. compounded quarterly for 1 year.
Period
Principal
Rate
Interest
Amount
1
2
3
4
Amount _________________
Interest_________________
c) Invest $1000 000 @ 10% p.a. compounded monthly for 5 months
Period
Principal
Rate
Interest
1
2
3
4
5
Amount _________________
Interest_________________
Amount
E INV 2 AM11
COMPOUND INTEREST USING THE FORMULA
Name:____________
COMPOUND INTEREST FORMULA:
There is a compound interest formula which calculates the amount directly.
A = _________________________
P = _________________________
r = __________________________
n = __________________________
t = __________________________
The value of n
The value of t
Annually n = ______
For time given in years
_______________
Semi-annually n = ______
For time given in months
_______________
Quarterly n = ______
For time given in days
_______________
Monthly n = ______
Daily n = ______
EXAMPLE 1:
Use the formula to calculate the Amount and Interest for an investment of $1000 @ 6%
p.a. compounded quarterly (4 times a year) for 2 years.
SOLUTION:
In this example: P = ________
The rate is 6% p.a. so r = ________
Compounded quarterly so n = ________
The time in years is 2 years so t = ________
The Amount = _______________________
To get the answer press the following: ______________________________
This comes to _______________________
ANSWER: The Amount is __________________________
The Interest is __________________________
EXAMPLE 2:
Find the amount and interest using the compound interest formula for an investment of
$1000 000 compounded semi-annually at 8% p.a. for 18 months.
SOLUTION:
In this example: P = ______________
The rate is 8% p.a. so r = ________
Compounded semi-annually so n = ________
The time in years is 18 months so t = ________
The Amount = _______________________
To get the answer press the following: ______________________________
This comes to _______________________
ANSWER: The Amount is __________________________
The Interest is __________________________
QUESTIONS FOR STUDENTS
Use the formula A = P ( 1 + r/n)nt to calculate the following:
Principal
1. $2500
Rate
p.a.
4%
Time
Compounded
3 years
Annually
2. $3500
r=
5%
t=
2 years
n=
Semi-annually
3. $13000
r=
2.5%
t=
2 years
Monthly
4. $5500
r=
12.5%
t=
10 years
n=
Quarterly
5. $15200
r=
6.2%
t=
2 years
n=
Daily
6. $5500
r=
10.5%
t=
30 days
n=
Daily
7. $10 000
r=
8%
t=
6 months
n=
Monthly
8. $4500
r=
12%
t=
9 months
n=
Semiannually
9. $1000 000
r=
8%
t=
6 months
n=
Monthly
r=
8%
t=
1 day
n=
Daily
r=
t=
n=
n=
10. $1000
000
Amount
Interest
FURTHER QUESTIONS
Calculate the Amount and Interest for the following:
a) $4000 @ 10% p.a. compounded semi-annually for 5 years
Amount _____________
Interest______________
b) $10 000 @ 8% p.a. compounded quarterly for 3 years
Amount _____________
Interest______________
c) $8000 @ 10% p.a. compounded monthly for 6 years
Amount _____________
Interest______________
d) $2000 @ 10% p.a. compounded semiannually for 12 years
Amount _____________
Interest______________
e) $1 000 000 @ 10% p.a. compounded monthly for 1 month (hint 1 month = 1/12 years)
Amount _____________
Interest______________
E INV 3 AM11
INVESTMENTS
EXAMPLES:
Name:________________
1. Find the amount and interest if $10 000 is invested @ 8% p.a. for 5 years compounded
annually
2. Find the amount and interest if $10 000 is invested @ 8% p.a. for 5 years compounded
semi-annually
3. Find the amount and interest if $5 000 is invested @ 12 % p.a. for 5 months
compounded annually
4. Find the amount and interest if $4 500 is invested @ 12 % p.a. for 9 months
compounded semi-annually
5. Find the amount and interest if $8 000is invested @ 7.8 % p.a. for 60 days
compounded semi-annually.
6. Find the amount and interest if $1 000 000 is invested @ 9.5 % p.a. for 7 days
compounded daily
PRACTICE QUESTIONS
1. Find the amount and interest if $10 000 is invested @ 5% p.a. for 6 years compounded
annually
Amount___________________________
Interest__________________
2. Find the amount and interest if $10 000 is invested @ 5% p.a. for 6 years compounded semiannually
Amount___________________________
Interest__________________
3. Find the amount and interest if $10 000 is invested @ 5% p.a. for 6 years compounded
quarterly
Amount___________________________
Interest__________________
4. Find the amount and interest if $10 000 is invested @ 5% p.a. for 6 years compounded monthly
Amount___________________________
Interest__________________
5. Find the amount and interest if $10 000 is invested @ 5% p.a. for 6 years compounded daily
Amount___________________________
Interest__________________
6. Find the amount and interest if $10 000 is invested @ 8% p.a. for 5 months compounded semiannually
Amount___________________________
Interest__________________
7. Find the amount and interest if $10 000 is invested @ 8% p.a. for 5 months compounded
monthly
Amount___________________________
Interest__________________
8. Find the amount and interest if $10 000 is invested @ 8% p.a. for 5 months compounded daily
Amount___________________________
Interest__________________
9. Find the amount and interest if $10 000 is invested @ 8% p.a. for 10 days
compounded semi-annually
Amount___________________________
Interest__________________
10. Find the amount and interest if $10 000 is invested @ 8% p.a. for 10 days
compounded daily
Amount___________________________
Interest__________________
CALCULATING TIMES FOR INVESTMENTS
EXAMPLES:
1. How long for $1000 to reach $1200 at 7% p.a. compounded semi-annually?
2. How long for $1000 to reach $1200 at 7% p.a. compounded monthly?
PRACTICE:
1. How long for $3000 to reach $4200 at 6% p.a. compounded MONTHLY?
2. How long for $1000 to reach $2000 at 5% p.a. compounded SEMIANNUALLY?
3. How long for $5000 to reach $6700 at 8% p.a. compounded MONTHLY?
4. How long for $1000 to reach $1200 at 7% p.a. compounded DAILY?
5. How long for $1000 to DOUBLE at 7% p.a. compounded MONTHLY?
CALCULATING RATES FOR INVESTMENTS
EXAMPLE:
What rate is needed for $1000 to reach $1200 if it is compounded semi-annually for three
years?
PRACTICE
1. What rate is needed for $1500 to reach $2500 if it is compounded semi-annually for
five years?
2. What rate is needed for $2000 to reach $4000 if it is compounded monthly for three
years?
3. What rate is needed for $3000 to reach $4000 if it is compounded annually for four
years?
4. What rate is needed for $10 000 to reach $15 000 if it is compounded quarterly for six
years?
E INV 5 AM11
INVESTMENTS: FURTHER QUESTIONS
Name:___________
EXAMPLE A: Lump Sum → Find the time taken
Determine the time taken for an investment of $2000 @ 9.3% p.a. compounded monthly to
double in value. Answer in years.
ANNUITIES
Determine the final amount for an investment of $200 paid at the end of every quarter @
6% p.a. compounded quarterly for 2 years.
Period
1
2
3
4
5
6
7
8
TOTAL
ANNUITY FORMULA:
There is an anuuity formula which calculates the amount directly.
A = _________________________
R = _________________________
i = __________________________
n = __________________________
t = __________________________
Annuity → Find the monthly payment
Determine how much you would need to pay twice a year @ 7% p.a. compounded semiannually to save $1 000 000 in 20 years.
A: Lump Sum Investment. Find the time taken in years.
1. Determine the time taken for an investment of $3000 @ 5.3% p.a. compounded monthly to
reach $4000.
2. Determine the time taken for an investment of $10 000 @ 4.5% p.a. compounded semi-annually
to reach $12 000.
3. Determine the time taken for an investment of $2500 @ 7.5% p.a. compounded quarterly to
reach $3000.
4. Determine the time taken for an investment of $6000 @ 5.5% p.a. compounded monthly to
double in value. Answer in years.
B: Annuities. Determine the final amount.
5. Determine the final amount for an investment of $300 paid at the end of every month @ 5% p.a.
compounded semi-annually for 3 years.
6. Determine the final amount for an investment of $100 paid every month @ 7.5% p.a.
compounded quarterly for 5 years.
7. Determine the final amount for an investment of $250 paid every month @ 8% p.a. compounded
monthly for 2 years.
8. Determine the final amount for an investment of $200 paid quarterly @ 6% p.a. compounded
semi-annually for 3 years.
9. Determine the final amount for an investment of $200 paid at the start of every month @ 4.5%
p.a. compounded semi-annually for 2 years.
10. Determine the final amount for an investment of $300 paid semi-annually @ 7.6% p.a.
compounded semi-annually for 6 years.
C: Calculate regular payments. Determine the payment.
11. Determine how much you would need to pay each month @ 7% p.a. compounded monthly to
save $10 000 in 10 years.
12. Determine how much you would need to pay each year @ 8% p.a. compounded annually to
save $5 000 in 5 years.
13. Determine how much you would need to pay at the end of each month @ 9% p.a. compounded
monthly to save $10 000 in 6 years.
14. Determine how much you would need to pay twice a year @ 10% p.a. compounded semiannually to save $6 000 in 3 years.
15. Determine how much you would need to pay quarterly @ 7.5% p.a. compounded quarterly to
save $10 000 in 4 years.
16. Determine how much you would need to pay each month @ 5% p.a. compounded monthly to
save $1000 000 in 25 years.
E INV 8 AM 11
Investments PRACTICE QUESTIONS
Name:_______________
1. to calculate the amount (Future Value) of the following
investments:
a) $1000 invested at 6% per annum compounded semi-annually for 5 years.
b) $ 800 invested at 4.8% per annum compounded semi-annually for 3 years
c) $ 600 invested at 8% per annum compounded quarterly for 3 years.
d) $1200 invested at 6.8% per annum compounded quarterly for 10 years.
e) $2500 invested at 12% per annum compounded monthly for 4 years.
f) $10 000 invested at 5.4% per annum compounded monthly for 8 years.
2. Determine the following times. Answer in years.
a) How long will it take an investment of $1 000 to reach $1 200 at 6.5% p.a.
compounded monthly? Answer in years.
b) How long will it take an investment of $35 paid at the end of each month at 6.5%
p.a. compounded monthly to reach $1200.
3. Determine the following times. Answer in years.
a) How long will it take for an investment of $5 000 at 5.6% p.a. compounded quarterly
to double in value?
b) How long will it take for an investment of $10 000 at 9.5% p.a. compounded semiannually to triple in value?
c) How long will it take for an investment of $3 000 at 8.2% p.a. compounded annually
to reach $5 000?
4. to find the future value for the following:
a) A bank offers an interest rate of 10% p.a. compounded annually. Pay $2400 at
the end of each year for three years.
b) A bank offers an interest rate of 5.7% p.a. compounded quarterly. Pay $500
invested at the end of each quarter for two years.
c) A bank offers an interest rate of 6.8% p.a. compounded monthly. Invest $ 100
every month for ten years.
d) Invest $200 every month at an interest rate of 8% p.a. compounded monthly for 20
years.
5. Determine the following times
a) How long will it take an investment of $500 paid each month at 6 % p.a.
compounded monthly to reach $1000 000?
b) How long will it take an investment of $500 paid each month at 12 % p.a.
compounded monthly to reach $1000 000?
c) How long will it take an investment of $200 paid each month at 9.5 % p.a.
compounded monthly to reach $250 000?
6. Determine:
a) What amount must be invested monthly from age 20 to age 55 at 8.5% p.a.
compounded monthly in order to accumulate $1000 000?
b) What amount must be invested quarterly from age 20 to age 60 at 6.4% p.a.
compounded quarterly in order to accumulate $500 000?
c) What amount must be invested daily from age 20 to age 55 at 7.4% p.a.
compounded daily in order to accumulate $1000 000?
7. Determine:
a) When you are born, your parents invest $50 a month at 6.8% p.a. compounded
monthly in a non-taxable Registered Education Savings Plan for your college
education. How much will be accumulated by the time you reach 18?
b) When you are born, your parents invest $2 a day in an RRSP at 8% p.a.
compounded daily for you. How old will you be when you have $10 000?
E LN 1 AM11
INTRODUCTION TO LOANS
Name:______________
1. What is the monthly payment on a loan of $1000 at 8% p.a. compounded annually for 4
years? What is the total cost of the loan? What is the finance charge?
Period
1
2
3
4
TOTAL
Monthly Payment
Total Cost of Loan
Finance Charge
_______________________________________________________________________
2. What is the semi annual payment on a loan of $2000 at 5% p.a. compounded semiannually for 5 years? What is the total cost of the loan? What is the finance charge?
Period
1
2
3
4
5
6
7
8
9
10
Monthly Payment
Total Cost of Loan
Finance Charge
LOAN FORMULA:
There is a loan formula which calculates the amount directly.
P = _________________________
R = _________________________
i = __________________________
n = __________________________
t = __________________________
E LN 2 AM11
LOANS PRACTICE QUESTIONS
Name:_______________
Calculate the payment, the total paid and the finance charge for the following:
1. $ 5000 loan paid monthly @ 7.5% p.a. compounded monthly for 6 years
Payment
___________________________________
Total Paid
___________________________________
Finance Charge
___________________________________
2. $ 8000 loan paid monthly @ 4.5% p.a. compounded semi-annually for 4 years
Payment
___________________________________
Total Paid
___________________________________
Finance Charge
___________________________________
3. $ 2000 loan paid monthly @ 8.5% p.a. compounded quarterly for 3 years
Payment
___________________________________
Total Paid
___________________________________
Finance Charge
___________________________________
4. $ 5000 loan paid quarterly @ 5% p.a. compounded semi-annually for 5 years
Payment
___________________________________
Total Paid
___________________________________
Finance Charge
___________________________________
5. $ 7000 loan paid quarterly @ 6% p.a. compounded quarterly for 3 years
Payment
___________________________________
Total Paid
___________________________________
Finance Charge
___________________________________
6. $ 20 000 loan paid monthly @ 7% p.a. compounded semi-annually for 10 years
Payment
___________________________________
Total Paid
___________________________________
Finance Charge
___________________________________
7. $ 100 000 loan paid monthly @ 7.5% p.a. compounded annually for 20 years
Payment
___________________________________
Total Paid
___________________________________
Finance Charge
___________________________________
8. $ 120 000 loan paid monthly @ 5.5% p.a. compounded semiannually for 25 years
Payment
___________________________________
Total Paid
___________________________________
Finance Charge
___________________________________
E LN 3 AM11
MORE LOANS
Name:_________________
Example 1: What interest rate compounded monthly is needed for a loan of
$5 000 to be paid off over 3 years with regular payments of $150 per month?
Example 2: How long is needed for a $4 000 loan compounded monthly at 5.8% to
be paid off with payments of $80 per month?
PRACTICE:
1.
What interest rate compounded monthly is needed for a loan of
$8 000 to be paid off over 6 years with regular payments of $160 per month?
2.
What interest rate compounded monthly is needed for a loan of
$4 000 to be paid off over 4 years with regular payments of $90 per month?
3.
What interest rate compounded monthly is needed for a loan of
$5 000 to be paid off over 5 years with regular payments of $100 per month?
4.
What interest rate compounded monthly is needed for a loan of
$4 500 to be paid off over 3 years with regular payments of $130 per month?
5.
What interest rate compounded quarterly is needed for a loan of
$3 000 to be paid off over 5 years with regular payments of $60 per quarter?
6.
How long is needed for a $5 000 loan compounded monthly at 8 % to be paid
with payments of $100 per month?
off
7.
How long is needed for a $3 000 loan compounded monthly at 6.2% to be paid off
with payments of $200 per month?
8.
How long is needed for a $10 000 loan compounded monthly at 10.5% to be paid
off with payments of $200 per month?
9.
How long is needed for a $20 000 loan compounded quarterly at 5.8% to be paid off
with payments of $800 quarterly?
10.
How long is needed for a $4 000 loan compounded semi-annually at 7.5% to be
paid off with payments of $400 semiannually?
E LN 5a AM 11
Practice
Name:___________
BUYING CARS
New Cars: The tax is_____________
Used Cars: The tax is ____________
EXAMPLE:
1. You wish to buy a new car for $45 000. You trade in your old car for $5 000. The
dealership offers a loan for 2% p.a. to be paid monthly over 4 years, compounded semiannually.
a. What is the tax on the new car? What is the total cost of the new car?
b. What is the amount borrowed?
c. What is the monthly payment?
d. What is the total payment over 4 years?
e. What is the finance charge?
PRACTICE:
1. You wish to buy a new car for $60 000. You trade in your old car for $10 000. The
dealership offers a loan for 1.5% p.a. to be paid monthly over 5 years, compounded semiannually.
a. What is the tax on the new car? What is the total cost of the new car?
b. What is the amount borrowed?
c. What is the monthly payment?
d. What is the total payment over 5 years?
e. What is the finance charge?
2. You wish to buy a new car for $70 500. You trade in your old car for $12 000. The
dealership offers a loan for 0.9 % p.a. to be paid monthly over 4 years, compounded semiannually.
a. What is the tax on the new car? What is the total cost of the new car?
b. What is the amount borrowed?
c. What is the monthly payment?
d. What is the total payment over 4 years?
e. What is the finance charge?
3. You wish to buy a new car for $120 000. You trade in your old car for $20 000. The
dealership offers a loan for 1.8% p.a. to be paid monthly over 3 years, compounded semiannually.
a. What is the tax on the new car? What is the total cost of the new car?
b. What is the amount borrowed?
c. What is the monthly payment?
d. What is the total payment over 3 years?
e. What is the finance charge?
4. You wish to purchase a used car for $10 000. You have a $3 000 down-payment. You
borrow from the bank at 6.8% to be paid monthly over 5 years, compounded semiannually.
a. What is the tax on the car you wish to purchase? What is the total cost?
b. What is the amount borrowed?
c. What is the monthly payment?
d. What is the total payment over 5 years?
e. What is the finance charge?
5. You wish to purchase a used car for $8 000. You have a $1 000 down-payment. You
borrow from the bank at 8.8% to be paid monthly over 3 years, compounded semiannually.
a. What is the tax on the car you wish to purchase? What is the total cost?
b. What is the amount borrowed?
c. What is the monthly payment?
d. What is the total payment over 3 years?
e. What is the finance charge?
6. You wish to purchase a used car for $15 000. You have a $4 000 down-payment. You
borrow from the bank at 7.5% to be paid monthly over 4years, compounded semi-annually.
a. What is the tax on the car you wish to purchase? What is the total cost?
b. What is the amount borrowed?
c. What is the monthly payment?
d. What is the total payment over 4 years?
e. What is the finance charge?
7. You wish to purchase a used car for $6 000. You have no down-payment. You borrow
from the bank at 5.5% to be paid monthly over 2 years, compounded semi-annually.
a. What is the tax on the car you wish to purchase? What is the total cost?
b. What is the amount borrowed?
c. What is the monthly payment?
d. What is the total payment over 2 years?
e. What is the finance charge?
E LN 6a AM 11
Name:_____________
BUYING A HOUSE
DEFINITIONS:
1. Mortgage (p.434)
2. Down-payment (own words)
3. Amortization Period (p.423)
4. Annuity (p.264)
5. Fair Market Value (p.430)
6. Assessed Value (p.237)
7. Mill Rate (p.434)
8. Property Tax (p.237)
EXAMPLE:
The fair market value for a house is $140 000. You have a minimum down-payment of
10% of the fair market value. The assessed value of the house is 80% of the fair market
value. The mill rate is 20 mills. Calculate the following:
a) The down-payment
b) The amount of the mortgage
c) The monthly payment at 6.8% p.a. compounded semi-annually for 25 years
d) The annual property tax
e) The amount needed each month to cover the tax
f) The total needed each month for mortgage plus property taxes
g) The amount owing (balance) after 10 years
h) The finance charge over 25 years
i) The monthly payment on the original loan if the mortgage was taken out for 15 years
instead of 25 years.
j) The finance charge over 15 years
PRACTICE
1. The fair market value for a house is $180 000. You have a minimum down-payment of
25% of the fair market value. The assessed value of the house is 80% of the fair
market
value. The mill rate is 25 mills. Calculate the following:
a) The down-payment
b) The amount of the mortgage
c) The monthly payment at 5.5% p.a. compounded semi-annually for 25 years
d) The annual property tax
e) The amount needed each month to cover the tax
f) The total needed each month for mortgage plus property taxes
g) The amount owing (balance) after 10 years
h) The finance charge over 25 years
i) The monthly payment on the original loan if the mortgage was taken out for 15 years
instead of 25 years.
j) The finance charge over 15 years
2. The fair market value for a house is $200 000. You have a minimum down-payment of
15% of the fair market value. The assessed value of the house is 85% of the fair
market
value. The mill rate is 22 mills. Calculate the following:
a) The down-payment
b) The amount of the mortgage
c) The monthly payment at 6.5% p.a. compounded semi-annually for 25 years
d) The annual property tax
e) The amount needed each month to cover the tax
f) The total needed each month for mortgage plus property taxes
g) The amount owing (balance) after 10 years
h) The finance charge over 25 years
i) The monthly payment on the original loan if the mortgage was taken out for 15 years
instead of 25 years.
j) The finance charge over 15 years
E LN 6b
Name:______________
MORTGAGES
EXAMPLE:
You wish to borrow $120 000 to buy a house. Calculate the monthly payment, the total
borrowed, and the finance charge for an interest rate of 7% p.a. compounded monthly over
25 years.
Monthly payment
Total Amount
Finance Charge
A. Investigate what happens when the interest rate is changed
If the same mortgage of $120 000 is taken out at 7.5% p.a. compounded monthly for 25
years, give the monthly payment, total amount, and finance charge.
Monthly payment
Total Amount
Finance Charge
How much do you save on your monthly payment at 7% instead of 7.5% p.a.?
How much do you save on your finance charge at 7% instead of 7.5% p.a. ?
B. Investigate what happens when the years of the mortgage is changed
If the same mortgage of $120 000 is taken out at 7% p.a. compounded monthly for 10
years, give the monthly payment, total amount, and finance charge.
Monthly payment
Total Amount
Finance Charge
How much do you save on the monthly payment if the time is 25 years instead of 10
years?
How much do you save on your finance charge if the time is 10 years instead of 25 years?
All mortgages are paid monthly and compounded monthly