# Abe makes a one-time deposit of $7,500 in a savings account at 3.3% annual interest compounded monthly.

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Question 1

Abe makes a one-time deposit of $7,500 in a savings account at 3.3% annual interest compounded monthly.

Bess deposits $120 into a savings account at the end of every month for 6 years at 3.3% annual interest compounded monthly.

(a) How much will Abe have in his account at the end of six years? Show work.

(b) How much will Bess have in her account at the end of six years? Show work.

(c) Who has more money in his/her account at the end of six years, Abe or Bess? _______

(d) How much has each person earned in total interest, at the end of six years? Show work.

(e) Who earned more in total interest, Abe or Bess? _______

Question 2

To purchase a house, a homebuyer takes out a mortgage, borrowing $240,000 at the annual interest rate 4.44%, compounded monthly for 30 years. (The problem has four parts.)

(a) Calculate the monthly loan payment. Show how to carry out the calculation.

(b) Complete the following table. (Round amounts to the nearest cent.)

Payment Amount Interest Paid Principal Interest Unpaid balance

1

2

Show the calculations necessary to arrive at the entries in the table.

(c) Calculate the total interest paid if the loan is held for the entire term. Show some work.

(d) Calculate the unpaid balance after 4 years. Show work.

What percentage of the amount borrowed is still unpaid?

- 10 years ago

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