*** Please answer questions 5, 6, and 7 ***

{Base your answers on provided answers on previous questions (1-4)}

Chapter 3: Project 2 Mortgages: Principal and Interest 1 3 When buying a house, the bank usually offers a variety of financing options. The most 4 popular is a thity-year mortgage. Interest rates will vary slightly from one bank to another 5 but it is usually the state of the economy and other factors which affect the interest rate 6 Payments are made monthly 811) For a loan of $100,000, and an interest rate of 7.675%, what is the monthly payment 9 for a thirty-year mortgage? Use the PMT function in Excel (see ch3tu4) 10 Note that the actual monthly payment will be much higher (about $300-5400 more) since you need to pay the tax and the insurance for the house 12 13 14 15 ($711.24 16 (2) Using the PV function, calculate the unpaid balance on the loan after (a) 120 payments ($87 126.79 (b) 240 payments ($59 459.72 (c) 320 payments (626 What do you observe? 17 20 The unpaid balance on the loan after each payment is decreasingR 24 (3) Briefly justify why you can use the "PV" (present value) function to calculate the 25 answers in part(2) We can use it since we are looking for payment let, which can be found by using PV function 28 (4) Of your total monthly payment, calculate the portion which goes toward the interest 29 using the IPMT function 30 (a) on the 120th payment (b) on the 240th payment (c) on the 320th payment S558.22 34 What do you observe? 7 (5) From your answer in (4), calculate the portion of the monthly payment which goes 8 toward the principal 0 (a) on the 120th payment (b) on the 240th payment (c) on the 320th payment 12 13 4 15 6 (6) You can use "Goal Seek" to figure out when the portion toward the principal exceeds 7 the portion toward the interest. Use the table below 18 What do you observe? Description Payment Number nper Interest payment ipmt Principal payment Princ. minus intrst. variable value 0 mt 55 You want to find the value of NPER so that principal-interest will equal zero Review 6 Chapter 3, Tutorial 2 for more details 7 9 (7) 50 "in the early years of a mortgage. most of each monthly payment is applied to interest How do your calculations in parts (1(5) corroborate the statement that Chapter 3: Project 2 Mortgages: Principal and Interest 1 3 When buying a house, the bank usually offers a variety of financing options. The most 4 popular is a thity-year mortgage. Interest rates will vary slightly from one bank to another 5 but it is usually the state of the economy and other factors which affect the interest rate 6 Payments are made monthly 811) For a loan of $100,000, and an interest rate of 7.675%, what is the monthly payment 9 for a thirty-year mortgage? Use the PMT function in Excel (see ch3tu4) 10 Note that the actual monthly payment will be much higher (about $300-5400 more) since you need to pay the tax and the insurance for the house 12 13 14 15 ($711.24 16 (2) Using the PV function, calculate the unpaid balance on the loan after (a) 120 payments ($87 126.79 (b) 240 payments ($59 459.72 (c) 320 payments (626 What do you observe? 17 20 The unpaid balance on the loan after each payment is decreasingR 24 (3) Briefly justify why you can use the "PV" (present value) function to calculate the 25 answers in part(2) We can use it since we are looking for payment let, which can be found by using PV function 28 (4) Of your total monthly payment, calculate the portion which goes toward the interest 29 using the IPMT function 30 (a) on the 120th payment (b) on the 240th payment (c) on the 320th payment S558.22 34 What do you observe? 7 (5) From your answer in (4), calculate the portion of the monthly payment which goes 8 toward the principal 0 (a) on the 120th payment (b) on the 240th payment (c) on the 320th payment 12 13 4 15 6 (6) You can use "Goal Seek" to figure out when the portion toward the principal exceeds 7 the portion toward the interest. Use the table below 18 What do you observe? Description Payment Number nper Interest payment ipmt Principal payment Princ. minus intrst. variable value 0 mt 55 You want to find the value of NPER so that principal-interest will equal zero Review 6 Chapter 3, Tutorial 2 for more details 7 9 (7) 50 "in the early years of a mortgage. most of each monthly payment is applied to interest How do your calculations in parts (1(5) corroborate the statement that