1.

You would like to buy a house that costs$ 350 comma 000$350,000.You have$ 50 comma 000$50,000

in cash that you can put down on the house, but you need to borrow the rest of the purchase price. The bank is offering you a 30-year mortgage that requires annual payments and has an interest rate of

7 %7%

per year. You can afford to pay only

$ 23 comma 210$23,210

per year. The bank agrees to allow you to pay this amount each year, yet still borrow

$ 300 comma 000$300,000.

At the end of the mortgage (in 30 years), you must make a balloon payment; that is, you must repay the remaining balance on the mortgage. How much will be this balloon payment?

Hint: The balloon payment will be in addition to the 30th payment.

2.

You are thinking of building a new machine that will save you

$ 5 comma 000$5,000

in the first year. The machine will then begin to wear out so that the savings decline at a rate of

3 %3%

per year forever. What is the present value of the savings if the interest rate is

8 %8%

per year?

The present value of the savings is $nothing. (Round to the nearest dollar.)