1. Future value of annuity formula: 

After 15 years, they will have accumulated: 

2. 
a.

b. After 20 years, they have paid: 

3. 

For the first 10 years, Sally makes regular monthly payments of $200 into her account. 
Recall the formula to find future value of an ordinary annuity: 
After the 10 years, her bank account has: 

With a monthly compound interest rate of 6%, after 20 years, this amount of money become:

Sally will have $108,495.16 at the end of this twenty years period.

4.  Sinking fund   $202.23

5. 
a. 

Option 1: Continuous

Option 2: Future Value of Annuity

Option 1 has a higher balance after 10 years

b. Subtract payments from the final balance 

Option 1 earns 7459.12-5000=2459.12. 

Option 2 Earns 7332.95-150*4*10=1332.95

6. To compare investments, simply see which has a higher effective annual rate

Effective rate of 1st  = 3.25%        effective rate of 2nd = 3.326% 2nd is better rate

For first option, it is compounded annually, so the effective rate is the same, 3.25%

For the second option,

Option 2 is better 

7. For a house with a down payment, only 110,000-10,000 = 100,000 must be borrowed

   20 year mortgage, compounded monthly, at 6.35%

a. mortgage payment   $736.77

b. How much will you end up paying for the house?
   Pay down payment plus all payments, or

   10,000+12*20*736.77 = 186,824.80

c. After 15 years, how much is owed on the house?
   Note that 5 years remain on the mortgage