(a) Find the PV of $5.6 million dollars. Management expects that to be the market value at the end of 8 years. Use the discount rate is 6% per year. Again, work the problem with a formula and also by using the function wizard.

(b) If can obtain the property for $2.8 million and then sell in six years for $4.75 million. What rate of return does the security provide?

(c) e. If we wanted to hold on to the property until it doubled in value, how long would that take if property values are expected to grow by 2% per year? Assume purchase price of $2.8 million and required rate of return of 8.5%.

(d) Find the PV of an ordinary annuity that pays $4000 at the end of each of the next 5 years if the interest rate is 7%. Then find the FV of that same annuity.

(e) g. Suppose the company buys the property for $2.8 million and tooks out a mortgage for $2 million. You have two repayment options. Option 1: Repay in 15 years at rate of 4.85% or Option 2: Repay in 30 year at rate of 6.25%. Calculate annual payments for each option. Set up an amortization schedule for Option 1 that shows the annual payment, and the amount of each payment that repays the principal, and the amount that constitutes interest expense to the borrower and interest income to the lender.

Year	Beg. Amount	Pmt	Interest	Principal	End Bal.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

Option 1 Total Interest Paid:

Option 2 Total Interest Paid:

(f) If the goal is to pay lesser interest to the lender, which option would you pick ?

(g) If paid off the loan in 15 years and opened a new account to save the mortgage payment for remaining 15 years at 6.2%, how much would you have saved up?

N:

I:

PV:

PMT:

FV: