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Problem 13

Compute the specified quantity. Round all answers to the nearest month, the nearest cent, or the nearest \(0.001 \%\), as appropriate. Simple Loans You take out a 6 -month, \(\$ 5,000\) loan at \(8 \%\) simple interest. How much would you owe at the end of the 6 months?

Expert verified

The total amount owed at the end of the 6 months would be $5,400.

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Chapter 5

Six years ago, I invested some money in Dracubunny Toy Co. stock, acting on the advice of a "friend." As things turned out, the value of the stock decreased by \(5 \%\) every 4 months, and I discovered yesterday (to my horror) that my investment was worth only $$\$ 297.91.$$ How much did I originally invest?

Chapter 5

Kara and Michael take out a \(\$ 120,000\), 30 -year, \(10 \%\) mortgage. After 3 years they refinance the remaining principal with a 15 year, \(6.5 \%\) loan. What were their original monthly payments? What is their new monthly payment? How much did they save in interest over the course of the loan by refinancing?

Chapter 5

You can choose between two investments that mature at different times in the future. If you knew the rate of inflation, how would you decide which is the better investment?

Chapter 5

Are based on the following table, which shows the 2008 annual inflation rates in several Latin American countries. \({ }^{13}\) Assume that the rates shown continue indefinitely. $$\begin{array}{|l|c|c|c|c|c|c|c|} \hline \text { Country } & \text { Argentina } & \text { Brazil } & \text { Bolivia } & \text { Nicaragua } & \text { Venezuela } & \text { Mexico } & \text { Uruguay } \\ \hline \text { Currency } & \text { Peso } & \text { Real } & \text { Boliviano } & \begin{array}{c} \text { Gold } \\ \text { cordoba } \end{array} & \text { Bolivar } & \text { Peso } & \text { Peso } \\ \hline \begin{array}{l} \text { Inflation } \\ \text { Rate (\%) } \end{array} & 9.2 & 6.3 & 15.1 & 13.8 & 25.7 & 5.0 & 8.5 \\ \hline \end{array}$$ Which is the better investment: an investment in Argentina yielding \(10 \%\) per year, compounded annually, or an investment in Uruguay, yielding \(9 \%\) per year, compounded every 6 months? Support your answer with figures that show the future value of an investment of one unit of currency in con- stant units.

Chapter 5

A real estate broker tells you that doubling the period of a mortgage halves the monthly payments. Is he correct? Support your answer by means of an example.

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