Application Assignment 3: Financial Planning
MATH 1395, Fall 2015
Overview Financia Inc. would like to contract your services due to internal scheduling conflicts. They have consulted you to compile a financial plan for their client, Mr. Swampton. The client has provided you with the necessary information to conduct the analysis. You should work in teams up to three students. The assignment is due before class on Thursday, December 3. Extra points will be given if questions 1-4 or 1-7 are checked by the instructor before Exam 3. An electronic copy of the assignment is available in MyMathLab/Document Sharing/Unit 3.
What to turn in… The attached technical worksheet is provided to report final results. To best maintain accuracy, round only your final answers. Final dollar amounts should be given to the nearest cent. Submit one technical worksheet per group (80% of grade). Attach your work, VERY neat, organized, and stapled (20% of grade). If you use the finance app, include the list of variables as inputted. There is no individual part.
Client Information After six years of marriage, Mr. Shrek Swampton and his wife Fiona are planning for two major purchases: a new vehicle and a new house. Complete the financial requests below and report your final answers in the technical worksheet. The following information has been provided by the client and market researchers:
•After taxes and medical insurance, the client has a monthly net income of $9,200 for the household.
•The client plans to purchase a new 2016 Brillante C3000 carriage. He expects a purchase price of $47,905. He has qualified for a 60-month auto loan at a rate of 3.2%. He will trade in his current vehicle, which is valued at $14,000, and use this money as a down payment toward the new carriage.
•The clients have been saving $1500 each quarter for the past six years. They also have $12,000 that they received as a wedding gift from Sir Lancelot. This was deposited into this same savings account which is earning 1.2% APR. They will use the total savings as a down payment on a house.
•Now that saving for a down payment is complete, the client would like to purchase a house. They believe they can afford a monthly payment up to $2,300 and plan on a mortgage with a 30-year term.
•The client is considering 2 houses. House A costs $495,500 and House B costs $429,900 (seller pays closing costs).
•Mortgage rates are currently 3.8% for a 30-year term and 3.1% for a 15-year term. (www.bankrate.com)
Financial Requests
1)Find the monthly payment for the client's new vehicle.
2)Find the total interest paid for the new vehicle.
3)Find the balance on the car loan after 2 years.
4)Create an amortization schedule for the first 3 months of the auto loan. (Refer to page 213 of text.)
5)How much money is available as a down payment for the client's house? Be sure to include both monthly savings amounts and gift amount.
6)Given the financial goals of the client what most expensive house that he can afford?
7)Mr. Swampton wishes to purchase the most expensive house that they can afford. Is this house A or house B? Determine the Loan Amount for this house.
8)Determine the client's monthly mortgage payment.
9)Determine the total interest that will be paid during the entire 30 year loan.
10)Find the balance of the home 10 years after purchase. At this point, he has paid a total of $_______________ in payments. $_____________ towards the house and $_____________ towards interest.
11)Determine the monthly payment if the client chooses a 15-year term for the mortgage
12)How much would the client save in interest by choosing the 15-year term mortgage instead of the 30-year term mortgage?
Bonus: Suppose the client chooses the 30-year loan. How much could he save over the life of the loan by paying $100 extra each month?
Technical Worksheet – 1395.A3.F15
Financial Plan for Mr. Shrek Swampton
Final value
1
Monthly payment for new vehicle
$
.25
2
Interest paid for new vehicle
$
.00
3
Vehicle balance after 2 years
$
.32 / .44
4 Amortization schedule (first 3 months of auto loan)
Payment
Payment Amount
Interest for period
Portion to Principal
Principal at end of Period
number
0
---
---
---
$
33,905.00
1
.25
.41
.84
$
.16
2
.23
$
.94
3
.63
$
.31
5
Total amount saved for down payment
$
.23
6
Price of home that can be purchased
$
.64
7
Loan amount for house (circle: A or B)
$
.77
8
Monthly mortgage payment (round up)
$
.08
9
Total interest paid during 30-yr mortgage
$
.03
10a
Mortgage balance after 10 years
$
.81
10b
Total of mortgage payments during 10 years
$
.60
10c
Total paid on principal during 10 years
$
.96
10d
Total of interest paid during 10 years
$
.64
11
Mortgage payment for 15-year term
$
.87
12
Interest saved with 15-year term
$
.20
Bonus
Savings if the client chooses the 30-year loan
$
.56
but pays an extra $100 each month.
*Remember to turn in your work – neat and organized. (Sloppy work will be penalized.)
MATH 1395, Fall 2015
Overview Financia Inc. would like to contract your services due to internal scheduling conflicts. They have consulted you to compile a financial plan for their client, Mr. Swampton. The client has provided you with the necessary information to conduct the analysis. You should work in teams up to three students. The assignment is due before class on Thursday, December 3. Extra points will be given if questions 1-4 or 1-7 are checked by the instructor before Exam 3. An electronic copy of the assignment is available in MyMathLab/Document Sharing/Unit 3.
What to turn in… The attached technical worksheet is provided to report final results. To best maintain accuracy, round only your final answers. Final dollar amounts should be given to the nearest cent. Submit one technical worksheet per group (80% of grade). Attach your work, VERY neat, organized, and stapled (20% of grade). If you use the finance app, include the list of variables as inputted. There is no individual part.
Client Information After six years of marriage, Mr. Shrek Swampton and his wife Fiona are planning for two major purchases: a new vehicle and a new house. Complete the financial requests below and report your final answers in the technical worksheet. The following information has been provided by the client and market researchers:
•After taxes and medical insurance, the client has a monthly net income of $9,200 for the household.
•The client plans to purchase a new 2016 Brillante C3000 carriage. He expects a purchase price of $47,905. He has qualified for a 60-month auto loan at a rate of 3.2%. He will trade in his current vehicle, which is valued at $14,000, and use this money as a down payment toward the new carriage.
•The clients have been saving $1500 each quarter for the past six years. They also have $12,000 that they received as a wedding gift from Sir Lancelot. This was deposited into this same savings account which is earning 1.2% APR. They will use the total savings as a down payment on a house.
•Now that saving for a down payment is complete, the client would like to purchase a house. They believe they can afford a monthly payment up to $2,300 and plan on a mortgage with a 30-year term.
•The client is considering 2 houses. House A costs $495,500 and House B costs $429,900 (seller pays closing costs).
•Mortgage rates are currently 3.8% for a 30-year term and 3.1% for a 15-year term. (www.bankrate.com)
Financial Requests
1)Find the monthly payment for the client's new vehicle.
2)Find the total interest paid for the new vehicle.
3)Find the balance on the car loan after 2 years.
4)Create an amortization schedule for the first 3 months of the auto loan. (Refer to page 213 of text.)
5)How much money is available as a down payment for the client's house? Be sure to include both monthly savings amounts and gift amount.
6)Given the financial goals of the client what most expensive house that he can afford?
7)Mr. Swampton wishes to purchase the most expensive house that they can afford. Is this house A or house B? Determine the Loan Amount for this house.
8)Determine the client's monthly mortgage payment.
9)Determine the total interest that will be paid during the entire 30 year loan.
10)Find the balance of the home 10 years after purchase. At this point, he has paid a total of $_______________ in payments. $_____________ towards the house and $_____________ towards interest.
11)Determine the monthly payment if the client chooses a 15-year term for the mortgage
12)How much would the client save in interest by choosing the 15-year term mortgage instead of the 30-year term mortgage?
Bonus: Suppose the client chooses the 30-year loan. How much could he save over the life of the loan by paying $100 extra each month?
Technical Worksheet – 1395.A3.F15
Financial Plan for Mr. Shrek Swampton
Final value
1
Monthly payment for new vehicle
$
.25
2
Interest paid for new vehicle
$
.00
3
Vehicle balance after 2 years
$
.32 / .44
4 Amortization schedule (first 3 months of auto loan)
Payment
Payment Amount
Interest for period
Portion to Principal
Principal at end of Period
number
0
---
---
---
$
33,905.00
1
.25
.41
.84
$
.16
2
.23
$
.94
3
.63
$
.31
5
Total amount saved for down payment
$
.23
6
Price of home that can be purchased
$
.64
7
Loan amount for house (circle: A or B)
$
.77
8
Monthly mortgage payment (round up)
$
.08
9
Total interest paid during 30-yr mortgage
$
.03
10a
Mortgage balance after 10 years
$
.81
10b
Total of mortgage payments during 10 years
$
.60
10c
Total paid on principal during 10 years
$
.96
10d
Total of interest paid during 10 years
$
.64
11
Mortgage payment for 15-year term
$
.87
12
Interest saved with 15-year term
$
.20
Bonus
Savings if the client chooses the 30-year loan
$
.56
but pays an extra $100 each month.
*Remember to turn in your work – neat and organized. (Sloppy work will be penalized.)
