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A: Suppose you make monthly mortgage payments of $1,345 and have 10 years left on the mortgage (next payment due next month). Assuming a 3.6%
A: Suppose you make monthly mortgage payments of $1,345 and have 10 years left on the mortgage (next payment due next month). Assuming a 3.6% stated annual interest rate for the mortgage, how much would you need today to pay off the mortgage?
B: Consider a firm with a contract to sell an asset for $220,000 seven years from now. The asset costs $75,000 to produce today. Given a relevant discount rate on this asset of 7.5 percent per year, will the firm make a profit on this asset? At what rate does the firm just break even?
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