Pretend that you are saving up for a down payment on a car or house. Pretend that we get an inheritance of $4,000 so we put the inheritance in a bank account that pays 3.50% APR compounded quarterly for five-years. We also decide to save $450 a quarter into this savings account to help grow our down payment.a. How much money do we have in our savings account at the end of all these years?
b. How much interest do we earn?
c. Excluding the inheritance, which someone else gave us, how much money did we contribute to the savings account?
Pretend that you need to buy a car because your employment depends on it, but you cannot afford a car right now so you decide to take out a loan. Suppose that you find a loan that charges 3.50% APR compounded monthly. Suppose you can only afford a $150 a month payment for the first year, and a $200 a month payment for the years after that. You think about it and decide on taking out a seven-year loan. (let’s assume the bank will let us pay $150 a month the first year and $200 a month for the remainder of the loan).a. How much money can you afford to borrow (remember to be accurate within a dollar. For instance: $12,345 not $12,300).
b. How much do you pay in total for the car?
c. How much do you pay in interest for the car?
This is a conceptual question. No numbers need to be found, nor is any support needed from Excel or Sheets. You can of course include Excel or Sheet support if you would like.
Pretend you want to take out a loan and you make payments according to how often the bank compounds (yearly, quarterly, monthly, daily). Consider the following situation:a. If the bank offered you the following terms on your loan, which would be the WORST for you and why?i. Simple interestii. Compound interest yearlyiii. Compound interest quarterlyiv. Compound interest monthlyv. Compound interest daily
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