An investment will pay $100 at the end of each of the next 3 years, $250 at the end of Year 4, $350 at the end of Year 5, and $550 at the end of Year 6. If other investments of equal risk earn 6% annually, what is its present value? Its future value? Do not round intermediate calculations. Round your answers to the nearest cent.
Present value: $_______
Future value: $ _______
16. Jan sold her house on December 31 and took a $40,000 mortgage as part of the payment. The 10-year mortgage has a 10% nominal interest rate, but it calls for semiannual payments beginning next June 30. Next year Jan must report on Schedule B of her IRS Form 1040 the amount of interest that was included in the two payments she received during the year.
a. What is the dollar amount of each payment Jan receives? Round your answer to the nearest cent.
$ $3,209.7
b. How much interest was included in the first payment? Round your answer to the nearest cent.
$ 2000
How much repayment of principal was included? Do not round intermediate calculations. Round your answer to the nearest cent.
$ 1209.7
How do these values change for the second payment?
- The portion of the payment that is applied to interest declines, while the portion of the payment that is applied to principal increases.
- The portion of the payment that is applied to interest increases, while the portion of the payment that is applied to principal decreases.
- The portion of the payment that is applied to interest and the portion of the payment that is applied to principal remains the same throughout the life of the loan.
- The portion of the payment that is applied to interest declines, while the portion of the payment that is applied to principal also declines.
- The portion of the payment that is applied to interest increases, while the portion of the payment that is applied to principal also increases.
Answer I
c. How much interest must Jan report on Schedule B for the first year? Do not round intermediate calculations. Round your answer to the nearest cent.
