Ann would like to buy a house. It costs $1,000,000. She will make an $80,000 down payment. She will take out a 30-year, fully amortizing, fixed rate mortgage (FRM) for $920,000. It will have equal, level monthly payments. The annual interest rate is 3.41%. She must pay 2% in discount fees at the closing of the loan. Notes: the home is bought and the loan is taken in month 0, the first payment is due in month 1. Also, Anns net cash flow each month is equal to the total cash inflows minus total cash outflows that month. Ann forecasts three possible scenarios for house price appreciation (HPA): A. Optimistic Case: 9% annual HPA, hence 9/12% monthly HPA B. Base Case: 4.5% annual HPA, hence 4.5/12% monthly HPA C. Pessimistic Case: 0% annual HPA, hence 0/12% monthly HPA

1. Prepare a mortgage loan amortization schedule for Ann using the Excel spreadsheet.

2. Assume Ann will make the required monthly payment every month for 30 years. How much home equity will Ann have after 15 years (180 months) of payments under each of the three HPA scenarios?