Problem 4
Your current bank, BankOne uses semiannual compounding and offers to pay 10% interest (APR) on your savings account. You want to deposit $1,000 today. A competing bank, BankToo, offers you the same interest rate (i.e. 10% APR) but promises to use monthly compounding. If you choose BankToo, how much extra money will you have in your savings account in four years as a result of this decision? Assume that you will not deposit (withdraw) any money to (from) your savings account over the next four years.
Problem 5
John and Mary bought a house in Thunder Bay exactly 3 years ago. They took out a $200,000 mortgage from RBC at that time. The mortgage had a 25-year amortization period and a stated interest rate of 12.3% (APR). What are the monthly payments?|||Problem 4
BankOne
$1,000 (1 + .05)^8 = ?
BankToo
$1,000 [1 + (.10/12)]^48 = ?
Problem 5
$200,000 / [(1- (1 / (1 + (.123/12))^300 )) / (.123/12)] = ?
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