Dean takes his boat out fishing every weekend. His current boatis still in okay condition, but he decides he’d like to buy a newone. He finds the boat of his dreams for $20,950. He does someresearch and finds that his credit union will give him a 5-yearloan with an APR of 4.25% if he makes a down payment of 18%.
- What is the amount of Dean’sdown-payment?
- What is the loan amount that Dean will be financing?
- What will his monthly payments be on the loan?
- What is the total amount Dean will pay for his boat if hefinances the purchase?
- How much interest will Dean pay the credit union over the lifeof the loan?
Sam, Dean’s younger brother, tries to convince Dean to save upfor a new boat instead of getting a loan. He tells Dean that thecredit union has a savings account option that offers an APR of1.2% compounded monthly, so long as the account maintains a minimumbalance of $2000.
- Since Dean has the down payment amount already, if he uses thatto start a savings account with the credit union, then adds $200 tothe account each month, how much will he have at the end of 5years?
- If Dean starts the savings account with his down payment money,how much would he have to deposit each month for 5 years to end upwith the $20,950 he needs for the boat of his dreams?
- If Dean follows the savings plan from problem 7, how much totalwill he have deposited into the savings account at the end of the 5years?
- If Dean follows the savings plan from problem 7, how muchinterest will he have earned in the savings account over the courseof the 5 years?
- Compare the total Dean would pay on the loan to the total Deanwould deposit into the savings account. How much would Dean save bygoing with the savings option?
- If Dean decides he wants to save up for the boat as fast aspossible, how long would it take the account to reach the fullvalue of $20,950 if he uses the down payment money to start theaccount then adds $400 each month? Give the answer as years with 2decimal places!
