Madeoff's Mortgage. Bernie Madeoff pays

$250,000

for a new four-bedroom 2,400-square-foot home outside Tonopah, Nevada. He plans to make a

20%

down payment, but is having trouble deciding whether he wants a

15-year

fixed rate

(6.396%)

or a

30-year

fixed rate

(6.878%)

mortgage.

a. What is the monthly payment for both the

15-

and

30-year

mortgages, assuming a fully amortizing loan of equal payments for the life of the mortgage?

b. Assume that instead of making a

20%

down payment, he makes a

10%

down payment, and finances the remainder at

7.128%

fixed interest for

15

years. What is his monthly payment?

c. Assume that the home's total value falls by 25%. If Bernie sells the house at the new market value, what would be his gain or loss on the home and mortgage, assuming all of the mortgage principal remains? Use the same assumptions as in part

a.