Q1. You plan to purchase a $100,000 house using a 30-year mortgage obtained from your local credit union. The mortgage rate offered to you is 8.25%. You will make a down payment of 20 percent of the purchase price.

a. Calculate your monthly payments on this mortgage.

b. Calculate the amount of interest and, separately, principal paid in the 25^th payment.

c. Calculate the amount of interest paid over the life of this mortgage.

Q2. You plan to purchase a house for $195,000 using a 30-year mortgage obtained from your local bank. You will make a down payment of 20% of the purchase price and monthly payment. You will not pay off the mortgage early.

a. Your bank offers you the following three options the payment: Option 1: Mortgage rate of 5.5% and zero points. Option 2: Mortgage rate of 5.35% and 1 point Option 3: Mortgage rate of 5.35 % and 1.5 points which option should you choose?

b.

Q4. Suppose you own 50,000 shares in a firm with 2.5 million total shares outstanding. The firm announces a plan to sell an additional 1 million shares through a rights offering. The market value of the stock is $35 discount.

a. If you exercise your preemptive rights, how many of the new shares can you purchase?

b. What is the market value of the stock after the rights offering?

c. What is your total investment in the firm after the rights offering? How is your investment split between original shares and new shares?

If you decide not to exercise your preemptive right, what is your investment in the firm after the right offering? How is this split between old shares and rights?