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MGF 1107 Chapter 2 Practice, Finance Additional Problems for section 2.5 in MGF 1107 1. 2. 3. Suppose you have a balance owed on a car loan of $10,000. The interest rate is 8% per year compounded monthly and your monthly payment is $300. A. At end of the first month when you make a payment, how much of the $300 is interest owed for the month and how much of it is applied to the balance? B. What is the new principal balance after making the payment? C. What will be the balance after making the payment at the end of the next month? D. Suppose you make payments until your balance is down to $1000. At the end of the month you make another $300 payment. How much of that payment goes toward interest and how much goes toward the balance? Suppose you have a balance owed on a home loan of $150,000. The interest rate is 6% per year compounded monthly and your monthly payment is $1000. A. At end of the first month when you make a payment, how much of the $1000 is interest owed for the month and how much of it is applied to the balance? B. What is the balance after making the first payment? C. What will be the balance after making the payment at the end of the next month? D. Suppose you make payments until your balance is down to $50,000. At the end of the month you make another $1000 payment. How much of that payment goes toward interest and how much goes toward the balance? Suppose that a stock increases in value by 20% per year for five years. If the initial value was $50 per share. What is the value five years later? What was the percentage increase over the five years? (Subtract out the Principal first) Answers: 1A. 2A. 3. $66.67, 233.33 1B. 9,766.67 1C. $9,531.78 1D. $6.67, $293.33 $750, $250 1B. $149,750 1C. $149,498.75 1D. $250, $750 $124.42 and the percentage growth over the five years is 149% (note it is not 100% as might have been expected.) You need to be able to solve problems about simple interest and compound interest by using the formula and showing the calculations. For problems that involve systematic saving and amortized loan repayment you may use the Finance menu on the calculator but you must show what you entered. For all problems you must write your conclusion as a sentence. Chapter 2 Review page 147: 1, 2, 3, 4, 5, 7, 10, 13, 17, 19 and problems above. You will be provided the following formulas on your test: