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Maria and John have been married for 2 years and just learned that they are pregnant.
1. They have been renting a small apartment but decide to purchase a house. They find one that is selling for $525,000.
They decide to make a 15% down payment
They are considering 2 financing options:
Option 1: a 4.0% interest 30-year mortgage:
Option 2: a 3.25% interest 15-year mortgage:
Answer the following questions showing all your work to reach each answer.
A. Which option will result in a lower monthly payment if they take the full term of the mortgage? What will that monthly payment be?
B. Which option will result in the most total interest if they take the full term of the mortgage? What will that total interest be?
2. They decide to shop for furnishings for the new house. They choose items that amount to $2400.00.
The store has 2 fixed installment loan options for purchasing:
Option 1: 20% down payment and financing at 7% simple interest per year for 2 years.
Option 2: no down payment and financing at 7.75% simple interest for 3 years.
Answer each of the following questions separately, showing all your work to reach each answer.
A. Which option will result in smaller total finance charge? What will that total finance charge be?
B. Which option will result in the smaller monthly payment? What will that monthly payment be?
C. They decide to defer any purchases and invest in a savings account a $2400 bonus that Maria will be getting from work. The rate is 1.5% interest compounded every month. How much interest will they earn in 3 years?
D. They decide to defer any purchases and loan the $2400 bonus to a needy relative at 3% simple interest per year.
How long will the term of the loan need to be if they want to earn $300 in interest (assuming the loan is not paid off early).
3. Maria and John have decided that once they live in a house, they want to have a pet. They go to an animal shelter and find several pets that they would love to take home.
There are 3 Siamese cats, 3 German Shepherds, 9 Labrador Retrievers, and 22 mixed breed dogs. Since they can’t decide, they place all the adoption cards in a container and draw one. Answer each of the following questions separately, showing all your work to reach each answer.
A. What is the probability that they select a cat?
B. What is the probability that they select either a German Shepherd or a Labrador Retriever?
C. What is the probability that if they select a dog, that it is not a mixed breed? D. What are the odds in favor of and against choosing a Siamese cat?
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