Suppose you are considering borrowing $120,000 to finance your dream house. The interest rate is 9% per year.

a. If the mortgage has a 30-year amortization schedule, what are the annual payments?

b. What is the principal payment (amortization of the loan) at the end of 15th year?

c. What is the remaining balance of your current mortgage after 10 payments?

d. Suppose after 10 years the interest rate have declined to 8% per year. Assume there will be no refinancing fees. What would be your payment if you refinanced your mortgage at the lower rate for 20 years?

2. You need to have accumulated savings of $2 million by the time that you retire in 20 years. Assume the interest rate is 10% per year on all loans and deposits regardless of maturity and is not expected to change in the future.

a. How much do you need to save each year, if you begin to save immediately to meet your goal?

b. Suppose you currently have savings of $200,000.b. How much do you need to save each year, at the end of the year, to meet your goal?

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