HW 4 (Loan Amortization) NOTES: 1. You must use MS Excel to complete this HW which is about the time value of money, and particularly, loan amortization. The word "amortization" means "to kill"; in the context of loan, it means "to pay off 2. The most important part of this exercise is how to compute the monthly payment (PMT) and how to apply it toward interest payment and principal repayment over the term of the loan. You need some competency using Excel. Feel free to call or e-mail me if you need help or have any questions. 3. There is a sample worksheet (Excel) uploaded as a guide (with a car loan) for the homework. Click on various cells to see how the answer was 4. Every student must work with a different set of numbers derived QUESTIONS Assume that you plan to buy a house in a good neighborhood. Assume a reasonable price for the house. Shop for the best mortgage financing rate on 15-year, fixed rate loan online. Attach documentation on the rate. Do not apply for a loan-this s just an exercise. Answer the following questions. 1. If you pay 10% down and finance the rest, how much are you borrowing? 2. Compute the monthly payment (PMT) on the loan using MS Excel features, Use the PMT function under financial functions". One should be able to verify your computations by clicking on the cell. Prepare an amortization chart for this loan using monthly payments . How much interest do you have to pay in total over 15 years? 5 Redo #3 above assuming that you make extra payment of $250 per month (from the beginning) to reduce the loan balance. How much interest would you pay in total with the extra $250 payment each month? 6, Compare the interest payments in #4 and #5 above. What other change(s) did you notice as a result of the extra payments