Home / Questions / Ted has always had difficulty saving money, so on June 1, Ted enrolls in a Christmas savin
Ted has always had difficulty saving money, so on June 1, Ted enrolls in a Christmas savings program at his local bank and deposits $750. That money is totally locked away until December 1 so that Ted can be certain that he will still have it once the holiday shopping season begins. Suppose that the annual rate of interest is 10 percent on ordinary savings accounts (that allow depositors to withdraw their money at any time). How much interest is Ted giving up by precommitting his money into the Christmas savings account for six months instead of depositing it into an ordinary savings account?
[Hint:If you invest X dollars at an annual interest rate of Y percent, you will receive interest equal to X × Y, where the interest rate Y is expressed as a decimal.]
Angela owes $500 on a credit card and $2,000 on a student loan. The credit card has a 15 percent annual interest rate and the student loan has a 7 percent annual interest rate. Her sense of loss aversion makes her more anxious about the larger loan. As a result, she plans to pay it off first—despite the fact that professional financial advisors always tell people to pay off their highest-interest-rate loans first. Suppose Angela has only $500 at the present time to help pay down her loans and that this $500 will be the only money she will have for making debt payments for at least the next year.
Instructions: Enter your answers as whole numbers.
a. If she uses the $500 to pay off the credit card, how much interest will accrue on the other loan over the coming year? $ .
b. On the other hand, if she uses the $500 to pay off part of the student loan, how much in combined interest will she owe over the next year on the remaining balances on the two loans? $ .
c. By how many dollars will she be better off if she uses the $500 to completely pay off the credit card rather than partly paying down the student loan?
[Hint: If you owe X dollars at an annual interest rate of Y percent, your annual interest payment will be X × Y, where the interest rate Y is expressed as a decimal.]
$ .
Ted has always had difficulty saving money, so on June 1, Ted enrolls in a Christmas savings program at his local bank and deposits $750. That money is totally locked away until December 1 so that Ted can be certain that he will still have it once the holiday shopping season begins. Suppose that the annual rate of interest is 10 percent on ordinary savings accounts (that allow depositors to withdraw their money at any time). How much interest is Ted giving up by precommitting his money into the Christmas savings account for six months instead of depositing it into an ordinary savings account?
[Hint:If you invest X dollars at an annual interest rate of Y percent, you will receive interest equal to X × Y, where the interest rate Y is expressed as a decimal.]
Angela owes $500 on a credit card and $2,000 on a student loan. The credit card has a 15 percent annual interest rate and the student loan has a 7 percent annual interest rate. Her sense of loss aversion makes her more anxious about the larger loan. As a result, she plans to pay it off first—despite the fact that professional financial advisors always tell people to pay off their highest-interest-rate loans first. Suppose Angela has only $500 at the present time to help pay down her loans and that this $500 will be the only money she will have for making debt payments for at least the next year.
Instructions: Enter your answers as whole numbers.
a. If she uses the $500 to pay off the credit card, how much interest will accrue on the other loan over the coming year? $ .
b. On the other hand, if she uses the $500 to pay off part of the student loan, how much in combined interest will she owe over the next year on the remaining balances on the two loans? $ .
c. By how many dollars will she be better off if she uses the $500 to completely pay off the credit card rather than partly paying down the student loan?
[Hint: If you owe X dollars at an annual interest rate of Y percent, your annual interest payment will be X × Y, where the interest rate Y is expressed as a decimal.]
$ .
Ted has always had difficulty saving money, so on June 1, Ted enrolls in a Christmas savings program at his local bank and deposits $750. That money is totally locked away until December 1 so that Ted can be certain that he will still have it once the holiday shopping season begins. Suppose that the annual rate of interest is 10 percent on ordinary savings accounts (that allow depositors to withdraw their money at any time). How much interest is Ted giving up by precommitting his money into the Christmas savings account for six months instead of depositing it into an ordinary savings account?
[Hint:If you invest X dollars at an annual interest rate of Y percent, you will receive interest equal to X × Y, where the interest rate Y is expressed as a decimal.]
Angela owes $500 on a credit card and $2,000 on a student loan. The credit card has a 15 percent annual interest rate and the student loan has a 7 percent annual interest rate. Her sense of loss aversion makes her more anxious about the larger loan. As a result, she plans to pay it off first—despite the fact that professional financial advisors always tell people to pay off their highest-interest-rate loans first. Suppose Angela has only $500 at the present time to help pay down her loans and that this $500 will be the only money she will have for making debt payments for at least the next year.
Instructions: Enter your answers as whole numbers.
a. If she uses the $500 to pay off the credit card, how much interest will accrue on the other loan over the coming year? $ .
b. On the other hand, if she uses the $500 to pay off part of the student loan, how much in combined interest will she owe over the next year on the remaining balances on the two loans? $ .
c. By how many dollars will she be better off if she uses the $500 to completely pay off the credit card rather than partly paying down the student loan?
[Hint: If you owe X dollars at an annual interest rate of Y percent, your annual interest payment will be X × Y, where the interest rate Y is expressed as a decimal.]
$ .
Nov 29 2019 View more View Less
explain the essential differences between full cost pricing and marginal cost pricing strategies
Jun 21 2021Human B. Why Should We Care about Species? | Learn Science a... Question 14 Quiz: Homework 3 - due November 17th 2 pts Suppose that you consider two ways that banks lose...
Feb 06 2020Matching In Exercises 9-14, match the series with the graph of its sequence of partial sums. [The graphs are labeled (a), (b). (c), (d), (e), and (f).]
Jul 28 2021Woolrich Company’s market research division has projected a substantial increase in demand over the next several years for one of the company’s products. To meet this dem...
Jun 27 2020We sent a text message to Julia, but she was very busy.busy ________Here is a tip:Words are categorized into different parts of speech, each with grammatical properties.
Jun 09 2021Refer to Electricity cost. Which of the following is an independent-variable value used to calculate the cost line when using the high-low method?a.$4,000b.$5,430c.$25,16...
Mar 13 2020Record the following transactions in General Ledger accounts of the General Fund of Fergieville. 1. Incurred salaries of $300,000, $280,000 of which was paid. 2. A long-t...
Apr 17 2020In Problem 1, Charlie’s utility function is xAxB. The price of apples used to be $1 per unit, and the price of bananas $2 per unit. His income was $40 per day. If the pri...
Dec 12 2019Describe the lifecycle of an inventory item in a merchandisingbusiness.
May 31 2021Ollie's Barbecue is a family-owned restaurant in Birmingham, Alabama, specializing in barbecued meats and homemade pies, with a seating capacity of 220 customers. It is l...
Aug 01 2021