By Leonard Rogers,2014-06-28 21:49
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FINANCE ON THE WEB Chapter 4 ...

Internet Insider -- Chapter 4a

Present and Future Values

    There are dozens of websites that provide calculators to help with personal finance

    decisions. Two good examples are and . We

    will use both. Log in first to the Quicken site and click on Bills and Banking to find a

    nice savings calculator. Suppose that you invest $1000 today. How much will you have

    after 30 years if the interest rate is 6 percent and you don’t save a dime? Check your answer with the savings calculator. Now try the same question assuming that you also

    save $200 a month.

Annuities Due

    You can buy a car for $20,000 or you can lease it for 36 monthly payments of $350 each,

    with the first payment due immediately. At the end of the 36 months the car will be

    worth $10,000. Which alternative should you prefer if the interest rate is 10 percent?

    You can check your answer by logging in to the personal finance page of and using the auto buy/lease calculator.

Mortgage Payments

    In example 4.11 we showed you how to work out mortgage payments. Log in to the

    personal finance page of and find the mortgage payment

    calculator. Assume a 20-year mortgage loan of $100,000 and an interest rate of 10

    percent. What is the amount of the payment? Check that you get the same answer using

    the annuity formula. Now look at how much of the first month’s payment goes to reduce the size of the mortgage. How much of the payment by the tenth year? Can you explain

    why the figure changes? If the interest rate doubles, would you expect the mortgage

    payment to double? Check whether you are right.

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