Assignmenti1 Loan Amortization A. You are thinking of purchasing a house that costs $235,000. You have $12,000 in cash that you can we as a down payment, but you need to borrow the rest of the purchase price. Assume there are no closing costs. The bank is offering a 30-year mortgage that requires monthly payments and has an annual interest rate of 4.25% per year. What will your monthly payments be if you sign up for this mortgage? Present the amortization schedule (Beginning balance, Monthly payment, Principal payment, Interest payment, Ending balance) on a monthly basis using Excel. Calculate the total amount of interest paid throughout the life of the loan (sum up the amounts in the Interest column). Create a graph depicting the changes in the portions of interest and principal for each monthly payment throughout the life of the loan. B. Suppose you have the option to take out a 15-year mortgage with an annual interest rate of 3.55% What will the new monthly payment be? - Present a new amortization schedule (Beginning balance, Monthly payment, Principal payment, Interest payment, Ending balance) on a new excel worksheet. Calculate the total amount of interest paid throughout the life of the loan (sum up the amounts in the Interest column) Create a graph depicting the changes in the portions of interest and principal for each monthly payment throughout the life of the loan. C. How much do you save if you go with the 15-year mortgage versus the 30-year mortgage example above? Compute the difference between the total interest paid in parts A and B. Points Grading rubric: A. Spreadsheet analysis of time value of money problem (loan amortization): Correct calculation of monthly loan payment Determination of interest and principal for each payment Amortization schedule is complete and loan balance is zero Graph depicting the changes in the portions of interest and principal for each monthly payment throughout the life of the loan is correct Student can identify impact of changes in loan terms on payments and ultimate cost of the loan 20 20 30 10 20 Notes: 1. I encourage you to watch the video and work out the example I have posted for Loan amortization. 2. In the video I illustrate how to total the monthly payments column for a 15-year scenario and the 30-year scenario and then find the difference between both. For this assignment, you can similarly sum up all the amounts in the Interest column for each scenario and then find out the difference between both. 3. Please save the excel file name it as Assignment 1_First Name_Last Name (eg. Assignment 1_Namrata_Saikia) and then upload it to the D2L folder for Assignment 1
