Monthly Deposits

Question 1 (5 points)

You want to buy a $300,000 house. You plan to make a down payment of 20% of the purchase price and finance the rest with a 30-year fixed rate mortgage loan. The loan is fully amortizing, and requires monthly payments at the end of each month. The nominal loan rate is 5%, compounded monthly. 1) How much of the purchase price will you finance with the mortgage loan? 2) What is your anticipated monthly mortgage payment?

Question 2 (5 point)

Suppose that you deposit $200 at the end of each month into an account paying an expected annual rate of return of 3%, compounded monthly. How much money will you have in the account in 10 years?

Question 3 (5 point)

An investment offers to pay you $300 per quarter for 10 years. If the annual rate is 11% with quarterly compounding, then what is the present value of these cash flows?

Question 4 (5 point)

You currently have $4,000 in a bank account that pays a nominal rate of 1%, compounded monthly. You plan to make additional monthly deposits of $200, starting at the end of this month. How many payments will you have made when your account balance reaches $50,000?

Excel Hints Example
Interest rates (rates of return, etc.) are entered in decimal form Enter 0.01 for 1%
A formula or function always begins with = =3/4 or =4*7
Use the ^ to raise a number to an exponent (1.03)^5 or 71^365
To find the number of periods, use the function =nper( =nper(
To round up a number, use the function =roundup( . You may include another function inside of the roundup function. This is particularly useful for expressing the number of compounding (or discounting) periods. =roundup(=nper(
To find the periodic rate, use the function =rate( =rate(
To find the present value, use the function =pv( =pv(
To find the periodic payment, use the function =pmt( =pmt(
To find the future value, use the function =fv( =fv(
To sum a column or row, type =sum( and select information to be summed. The autosum feature is an alternative. =sum(
Use cell references whenever possible If the number in cell B2 is 5, reference cell B2 by typing = and selecting cell B2, then hit enter
To copy the contents of one cell, hover the cursor over the box in the lower right corner until the black crosshair appears. Left mouse click, hold, and drag. Control-C followed by Control-V also copies content.
To anchor a cell address, type $column$row $D$5 anchors cell address D5
To anchor a column, but allow the row reference to change, type $columnrow $D5 anchors column D, but not row 5
To anchor a row, but allow the column reference to change, type column$row D$5 anchors row 5, but not column D
Selecting a cell address and hitting the F4 function key on the keyboard will cycle through column/row anchors

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