You have a credit card with a balance of $18,000. The annual interest rate on the card is 18% compounded monthly

You have a credit card with a balance of $18,000. The annual interest rate on the card is 18% compounded monthly, and the minimum payment is $400 per month. If you pay only the minimum payment each month and do not make any new charges on the card, how many years will it take for you to pay off the $18,000 balance?

Answer:  Calculator steps:

18,000                   PV

-400                       PMT

18                           I/yr or I

N = Approximately 75 months = 6.25 years

If you have an opportunity cost of 10%, how much must you invest each year to have $4,000 accumulated in 10 years?

Answer:  Using a financial calculator, N=10, i=10, PV=0, FV=4000, solve for PMT=-250.98

You have just received an endowment of $32,976. You plan to put the entire amount in an account earning 8 percent compounded annually and to withdraw $4000 at the end of each year. How many years can you continue to make the withdrawals?

Answer:   Using a financial calculator, i=8, PV=32976, FV=0, solve for PMT=-4000, solve for N=approximately 14 years

To repay a $2,000 loan from your bank, you promise to make equal payments every six months for the next five years totaling $3,116.20. What annual rate of interest will you be paying?

Answer:  Using a financial calculator, N=10, i=10, PV=0, FV=4000, solve for PMT=-250.98

        Annual interest rate = (.09)(2) = .18 = 18%

You are saving money to buy a house. You will need $7,473.50 to make the down payment. If you can deposit $500 per month in a savings account which pays 1% per month, how long will it take you to save the $7,473.50?

Answer:   $7,473.50 = $500 FVIFA[1%, n periods]

14.947 = FVIFA[1%, n periods]

        n = 14 months

You have borrowed $70,000 to buy a speed boat. You plan to make monthly payments over a 15-year period. The bank has offered you a 9% interest rate, compounded monthly. Create an amortization schedule for the first two months of the loan.

Answer:  Using a financial calculator N=180, i=9/12, PV=70000, FV=0, PMT=-709.99

MO         Beg                         PMT               Int.                 Princ.             End

1              $70,000                 $709.99         $525              $184.99         $69,815.01

2              $69,815.01           $709.99         $523.61         $186.38         $69,628.63