Mr. Boyd bought 450 acres of land at $5,680 per acre. He paid 30 percent down and obtained a loan for the balance at 6 percent over 25 years. He is to pay off the principal in equal annual payments. The annual interest on the balance at the end of the year is to be paid semiannually. He planted 295 acres in corn that cost him $4.20 per bushel to produce. He had a good year with a yield of 182 bushels per acre. He sold the corn for $6.15 per bushel. He planted 120 acres in soybeans. Mr. Boyd lived in an old plantation house on the farm. The upkeep on the house is approximately $1,850.00 per year. The heating and cooling costs approximately $2,892.85 per year. Mr.Boyd built a new house that cost $170,000. He is able to pay 25 percent down and obtain a loan on the balance at 7.25 percent. He

is able to arrange to pay off the principal in equal annual payments over 30 years, and the interest is paid annually on the remaining balance. The heating and cooling will be cut by 80 percent and the upkeep by 95 percent.

a. What was the payment (principal plus interest) the first year on the farm?
b. What was the profit from the corn?
c. Is it possible to make enough from the soybeans to make the balance of the payment? Explain.
d. What will he owe on the house after the fourth year?
e. What will he save on upkeep and heating and cooling per year?
f. What will be the interest the fifth year?
g. How did the saving on upkeep and heating and cooling compare to the interest paid the fifth year?


a. $147,420
b. $104,695.50
c. yes (answer may vary)
d. $110,500.00
e. $4,071.78
f. $8,011.25
g. saving is about 1/2 of the interest

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