AutoSave OFF Home Insert Draw Page Layout Formulas Data Review View Tell me Calibri (Body 11 ' == Wrap Text Paste BIU a. Ar IM Merge & C G28 Xfx Time B C D E F H 1 K 1) You have just purchased a house and would like to see how the amortization of your payments look. The house cost $600,000. You financed 80% of the purchase price and put 20% as a downpayment. Your mortgage is a 15 year loan with an APR of 4.5% a) Show the amortization for the first five months of the loan. b) Explain in words what your answer to cell F16 reflects. Payment Principal Balance Interest Principal Time 0 1 2. 3 4 5 2) You are considering buying a business and are unsure how much to offer the owners. The business is expectd to produce $100,000 in cash flow in year one. This cash flow is expected to increase by 18% per year for the next five years. At the end of five years, you expect the product to be obsolete and therefore have no value. a) At a 9% rate of return, what is the maximum you would be willing to pay for the business? b) If they offer you the business at $550,000, would you buy it? If so, what rate of return are you earning on this investment? c) If the cash flow didn't start until the end of year three, what is the maximum you would pay? (assume the same cash flow and growth rate) Time Cash Flow Time Cash Flow 3) You are offered three options on CD's from your local bank. Which one will give you the greatest effective return? a) Semi-annual compounding, APR = 5% b) Annual compounding, EAR -5.25% c) Daily compounding, APR4.95%