Concept explainers
Michael and Lynn Sullivan have a ten-year-old loan for
a. Find their monthly payment.
b. Find the unpaid balance of the loan.
c. Find the amount of interest they will save by prepaying.
d. The Sullivans decided that if they paid off their loan, they would deposit the equivalent of half their monthly payment into an annuity. If the ordinary annuity pays 9% interest, find its future value after 20 years.
e. The Sullivans decided that if they do not pay off their loan, they would deposit an amount equivalent to their unpaid balance into an account that pays 94% interest compounded monthly. Find the future value of this account after 20 years.
f. Should the Sullivans prepay their loan? Why or why not?
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