Problem: A $350,000 home mortgage with a rate of 3.5 % compounded continuously is borrowed for a period of 30 years. (A) Find the amount, K, that is needed to be paid off each year. (note: your K value should be negative because it is a "withdraw" from the principal, but your answer should be reported as a positive number) To pay off the loan in 30years, $ Number would need to be paid off each year.pond to the nearest can (B) Using the value found in part (A), how much money will be spent over the period of the loan repaying the initial balance of $350,000? $ Number round to the nearest dollar)
Problem: A $350,000 home mortgage with a rate of 3.5 % compounded continuously is borrowed for a period of 30 years. (A) Find the amount, K, that is needed to be paid off each year. (note: your K value should be negative because it is a "withdraw" from the principal, but your answer should be reported as a positive number) To pay off the loan in 30years, $ Number would need to be paid off each year.pond to the nearest can (B) Using the value found in part (A), how much money will be spent over the period of the loan repaying the initial balance of $350,000? $ Number round to the nearest dollar)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:We have seen before that money deposited into an account with continuous interest follows
the A = Pert formula. However, this required strict conditions that the money cannot be
withdrawn or added to throughout the term of the investment.
A more complicated model that allows for deposits/withdraws is:
A (t) = Pert+K (ert - 1)
where K is the constant amount deposited (x>0) or withdrawn (x<o) each year.
Problem: A $350,000 home mortgage with a rate of 3.5 % compounded continuously is
borrowed for a period of 30 years.
(A) Find the amount, K, that is needed to be paid off each year.
(note: your K value should be negative because it is a "withdraw" from the principal, but
your answer should be reported as a positive number)
To pay off the loan in 30years, $ Number would need to be paid off each year. (round to the
nearest cent
(B) Using the value found in part (A), how much money will be spent over the period of
the loan repaying the initial balance of $350,000?
$ Number (round to the nearest dollar)
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