Question

Please show work and formulas:

A: You deposit $100 for the next 15 years earning 10% per year. What would your balance be at the end of the 15 Years?

B: You borrow $100,000 for 18 years at an annual rate of 7%. What would be your fixed QUARTERLY loan payment?

C: For the loan in #5 above, what percent of your first payment would apply to the principal?

Answer 1

A.
Future value of annuity	Annuity amount*((1+r)^n-1)/r)
Future value of annuity	100*((1.10^15)-1)/0.10)
Future value of annuity	100*31.77248
Future value of annuity	$3,177.25
Thus, balance at end of 15 years is $3,177.25
B.
Interest rate (r )	1.75%	7%/4
No of payments (n)	72	18*4
Quarterly loan payment	Present value/((1-(1+r)^-n)/r)
Quarterly loan payment	100000/(1-(1.0175^-72)/0.0175)
Quarterly loan payment	100000/40.75645
Quarterly loan payment	$2,453.60
Thus, quarterly loan payment is $2,453.60
C.
Interest payment in first instalment	100000*1.75%
Interest payment in first instalment	$1,750
Principal amount	2453.60-1750
Principal amount	$703.60
% of principal paid in first payment	703.60/2453.60
% of principal paid in first payment	28.68%