# Getting Started: Case Study

1. Write two exponential models for the given information below. Use both and .

a)

Hours, t

0

4

6

7

9

12

Tribbles, y

2

23

80

148

208

3214

b)

2. You put $400 into a savings account that yields 4% interest compounded monthly. What will be the account balance in 3 years?

3. You deposit $3000 into a savings account that yields 3% compounded continuously.

How long will it take for your account to have a balance of $4500?

Extensions:

You are a financial planner. Your clients, Sally and Roberto Smith, would like to begin saving money with the long term goal of buying a house. They claim to have $7000 saved but it is not in an interest bearing account.

1. The Smiths believed that their credit score was

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We have been working in the financial planning industry for about fifteen years, and we have made many couples’ dreams of buying a house reality. Therefore we are more than happy to add the Smiths to our list of happily pleased customers.

When they first came to us they were in very harsh financial conditions, we thought that they were going to be our hardest customers yet. When they told us that they had a credit score of 620, we knew that is was going to be very hard to tell them the amount of mortgage interest rate they were going to pay because they might’ve got a heart attack. So we briefly gave them the news that according to MyFico, a credit score of 620 has a mortgage interest rate right around 4.945 percent. Another source is Zillow, and according to them it is an interest rate of 4.845 percent for a credit score of 620.

After that they came to us and told us that their credit score had miraculously improved to 700. That put them in a much better situation with their financial currency. They were very happy and delighted that a credit score of 700 has a mortgage interest rate of 3.578 percent, according to MyFico. Also according to Zillow, it is a mortgage interest rate of 3.506 percent for a credit score of

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The Smiths were still worried that the down payment would still be very unaffordable. In that case we told them that according Interest, an FHA loans usually requires about 3.50% of down payment depending of course on how large the loan actually is. They were very pleased with that wonderful news.

However there was a big problem. According to the FHA, there is restricted limit for how big the loan is. It can not be greater than $271,000. This was a very big problem since the loan they were trying to receive was $285,000, more than the restricted limit.

The smiths started panicking and worried that their dream of buying a home was not going to become reality. Therefore, we explained to them that that their down payment had to be of right around $9,486.75 since that is 3.5% of $271,000. So the total amount of money that they will have to raise is a total of $ 16,436.75.

That is that total amount of money they have to raise because they have to give a down payment of $9,486.75. And since they already have $7,000 they subtract it and they have to raise 2,486.75. And the difference between the total house price that is $285,000 and the limit of a FHA loan is $271,050 is $13,950. So all together