2.3-2.

4: Savings Plans, Loan Payments

and Credit Card Payments
 Group 3 Activity
2.3-2.4 Activity
Choose a reader for the day. You can switch it up at any time. Work through these
items together as a team. Have your class prep notes handy to refer to and you can
also use the book to help you.

Use a spreadsheet to work on these problems. Write down the spreadsheet syntax to
show your work. For example: =FV(.05/12, 2*12, 200, 0).
 
Please answer each question in a complete sentence.
 
1. Jackie is 34 years old. She would like to have one million dollars in her retirement
account when she is 65 years old.
 
a. How much would she need to deposit every month into an account with an
APR of 7.25%, compounded monthly, to achieve her goal?
65-34=31 years
=pmt(.0725/12,31*12,0,1000000) =$719.22
They need to deposit $719.22 every month to have 1 million dollars in their
retirement account by age 65.
 
 
b. If she had started the account at age 21 (same APR), how much would she need
to deposit every month to achieve her goal?
 
65-21=44
=PMT(.0725/12,44*12,0,1000000) = $262.04
They would need to deposit $262.04 every month to hit their goal
 
c. If she had started the account at age 21 (same APR) and deposited the amount
calculated in part (a) every month, what would the balance be when she retired
at age 65?
  =FV(.0725/12,44*12,719.22,0) = $2,744,713.35
They would have $2,744,713.35 by age 65.
 
 
 
 d. How much would she need to deposit as a lump sum at age 21 with the same
APR (without making another payment) to have a million dollars at age 65?
 
  =PV(.0725/12,44*12,0,1000000) = $41,568.93
They would need to deposit $41,568.93.
 
  2. Sam has a student loan of $30,000 at a fixed APR of 4.45%. If they want to pay it off
in 15 years,
a. How much would they pay per month?
 
=PMT(.0445/12,15*12,30000,0) =$228.73
They would need to pay $228.73 per month.
 
b. How much would they pay in total?
 
2783.82*15=$41,757.30
They would pay $41,757.30 in total.

What percentage of the total was paid toward the loan amount of $30,000 and what
percentage was paid toward interest?

Divide the part by the whole

 
 
 
 
3. You want to buy a $350000 home. You plan to put 10% down and take out a 30-year
fixed mortgage on the rest.
.1x350,000= 35,000 
 
a. What will the loan amount be? 350,000-35,000=315,000

The loan amount is $315,000.

 
  
b. What will your monthly payment be if the interest rate is 4.5%?
 
=pmt(.045/12,30*12,315000,0) =$1596.06
Your monthly payment will be $1596.06.

c. If you make all the payments for 30 years, how much would you have paid for the
house in total?
 
$1596.06*30*12=$574,581.60
 
 
d. In part b above, what number would you get if you switch the 0 and the 315,000?
Why are the answers so different? Explain the difference between these two
scenarios.

 
 $414.81.  The numbers are different because the future value is 0 and the present
value is $315000, versus the new one the present value is 0 and the future value is
$315000.

4. Tan has a balance of $1,650 on his credit card. His card has a 19.99% APR
compounded monthly. His minimum payment is 3% of the balance after the interest is
applied or $50, whichever is more. Calculate his minimum credit card payment for this
month.

=PMT (.1999/12, 12*1, 1650,0) = $152.84

=FV (.1999/12,1*12,0,1650)= $2011.80 
3% of 2011.80 is $60.55
minimum payment: $60.55

Car Loan Spreadsheet Activity

 
1. Open the Car Loan Spreadsheet template. It is view only - please have one person
make a copy using file -> make a copy and share it with each group member.

The spreadsheet has 8 cars in columns with different purchase prices and loan
information.
     
a. Write a formula using cell references in B5 for the loan amount. Then use the
fill-across feature to copy the formula across the whole row.

=PMT(B7/12,B6*12,B3-B4)
 
b. Write a formula using cell references in B8 for the monthly payment. Then copy
the formula across the whole row.

=-D8*D6*12

 
c. Which car would you choose and why? The Toyota Tundra. Because I’m a Yota
loyal kind of fella and have a Land Cruiser I could give a rest for a bit =)
 But to save some money here, still the Tundra cause of the overall cost.. plus it’ll
run forever
 
 
(Problems 2 and 3 in the spreadsheet are challenge problems and optional. Make
sure you have time for the review activity that follows. Feel free to check in with
me if you’re not sure:)
 
2. You are checking out a special for a 2016 Nissan Pathfinder SL priced at $33,750. 
There are two offers to choose from (both with zero down):
Option A: No rebate and 4.99% APR
Option B: $3,000 rebate and 8.75% APR (The rebate reduces the loan by $3,000)
 
a. Type in the principal values for options A and B in B15 and B19.
 
b. Write a formula in cell C14 using cell references to calculate the monthly
payment for option A. Copy the formula across.
 
c. Write a formula in cell C18 using cell references to calculate the monthly
payment for option b. Copy the formula across.
 
d. Which is the best option, A or B?  Explain.
 
 
 
 
 
 
3. For problem 5, option A, how much would you need for a down payment to keep your
monthly payment less than $350 on a 7-year loan? (Can you do this in two different
ways as a check?)

2.1-2.4 Mixed Review Practice - All financial formulas

Write the letter of the graph that matches the type of interest.

1. Simple Interest ___A_______                                    

2. Compound Interest ___B______

 
  

 
3. Write the letters in order from the type of compounding that would give the lowest
amount to the type that would give the highest amount (assuming the same interest
rate).

Highest                                                                                                                 least 

A. Daily         B. Continuously          C. Monthly            D. Quarterly       E. Annually
Use the spreadsheet formulas to solve each problem and show your formula and any
other steps you use.
 
4. a. You deposit $10,000 into an account that earns 5% interest, compounded
quarterly. How much will you have in 20 years?
 
fv= (.05/4, 20*4, 0, 10000) = $27,014.85
 
 
b. What percentage of your total balance is from interest?
 
 
 
 
5. You loan a friend $1,000 for 2 years at 3% simple interest. How much will they pay
you back?
 
$=fv(.03,2,1000,0) 
  
6. a. You are buying a condo for $282,500 and putting 13% down. You will take out a
conventional 30-year mortgage for the rest with an interest rate of 5%. How much will
your monthly payment be?
 $36,725
 
 
b. If you stay there for 30 years, how much in total would you spend on the
condo?
 
 
 
7. You want to compare an account that earns 6.1% interest compounded daily with an
account that earns 6.2% compounded quarterly. Find each effective rate. Which
account earns more?
 
 
 
 
8. You deposit $7,000 into an account that earns 8% interest compounded continuously.
How much will you have in 10 years?
 
$15578.78
 
b. How much interest would you earn?
 
15578.78-7000= $8578.78
 
 
9. If you want to have 500,000 in 25 years and you find an account with a 7.5% interest
rate compounded daily, how much would you need to deposit now? 
 
 
 
10. a. If you put $200 per month in a savings account with a 6.2% interest rate
compounded monthly, how much will you have in 35 years?
 
$ 1741.90
 
            b. How much interest would you have earned?
 

1741.90-200= $1541.9