Macy owns a restaurant, her business costs include tools at $8,000.00, mechanical equipment at $4,000.00, food at $7,000.00, and miscellaneous at $2,600.00. She finances the business with a bank loan with end-of-month payments at 4.00% compounded semi-annually, amortized over 2 years. After 2 years Macy saved $30,500.00, she is deciding between investing in property or investment bonds.

OPTION 1: Property: She can use her saving for a down payment on a property that costs $152,000.00, and $30,500.00 will be the down payment. The fixed interest rate on the mortgaged amount is 2.20% compounded semi-annually for 7 years.

OPTION 2: Bonds: A $36,000.00 bond is set to mature in 2 years. The bond rate is 2.10% payable semi-annually. The market rate is 2.20% compounded semi-annually. Macy will only purchase the bond if she can afford it and if she can get it at a discount, as she thinks the market rate will go down, therefore making her bond more valuable in the future.

Business Loan Questions:

a. What are her monthly payments to settle the loan?

b. Whats the principal balance outstanding on the loan after 1 year?

c. What will the size of the final payment be?

d. Create a partial amortization schedule for the loan.

Property Mortgage Questions:

e. What are the monthly payments to settle the mortgage?

f. What will the size of the final payment be?

g. Create a partial amortization schedule for the loan.

h. Approximately how long would it take to settle the loan with regular monthly payments of $2000 instead of the PMT value calculated in part e?

Bonds Questions:

i. What is the purchase price of the bond if purchased today, 2 years before maturity.

j. Does Macy have enough to buy the bond using their $30,500.00 savings? Should she buy the bond? Why or why not?