The Andreotti familycomprising Mr Andreotti, aged 40, Mrs Andreotti, aged 38, and their three young children relocated to Barcelona in 2020 when Mr Andreotti received a job offer from a leading investment banking giant For the next six years, they rented a three bedroom condominium for 2 000 in Barcelona per month, which included parking and condominium fees Option B consisted in acquiring the property with a mortgage scheme for 40 years The ownership was demanding an initial down payment of 1 000 000 The total price of the apartment was still not clear, it seems there was some space for negotiation Mr Andreotti new that the interest applicable rates were very attractive, around 2 4 compounded monthly, this is supposed to be the market rate for this type of activities Mr Andreotti is fixing the maximum amount he can pay monthly in 2 000 What is the maximum amount that Mr Andreotti should pay Show the calculations and explain why (15 points) What is the total amount that Mr Andreotti will pay in total after 40 years (15 points) What is the present value of the rental contract offered by the owner as option A (15 points) Mr Andreotti believes that he might be interested in selling the apartment in 40 years time, this is when he is planning to retire If the interest rates remain at the existing level, what will be the price of the apartment in that moment (15 points) Mr Andreotti is very happy for knowing how to calculate future values and present values, because this helps him in taking this type of decisions Having said that he wonders what the future value of the rental contract could be Can you help him Explain your answer and show your calculations (10 points) 6) We are still thinking that the price of the apartment is very expensive, we believe we could convince the bank of making payments only once a year, at the end of the year The interest rate would still be the same 2 4 , how much money have we saved with this action a) In the payments for each year b) in the total amount paid for the whole period c) what is the present value of the savings

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The Andreotti familycomprising Mr. Andreotti, aged 40, Mrs. Andreotti, aged 38, and their three young children relocated to Barcelona in 2020 when Mr. Andreotti received

The Andreotti familycomprising Mr. Andreotti, aged 40, Mrs. Andreotti, aged 38, and their three young children relocated to Barcelona in 2020 when Mr. Andreotti received a job offer from a leading investment banking giant. For the next six years, they rented a three-bedroom condominium for 2.000 in Barcelona per month, which included parking and condominium fees.

Option B: consisted in acquiring the property with a mortgage scheme for 40 years. The ownership was demanding an initial down payment of 1.000.000. The total price of the apartment was still not clear, it seems there was some space for negotiation.

Mr. Andreotti new that the interest applicable rates were very attractive, around 2.4% compounded monthly, this is supposed to be the market rate for this type of activities.

Mr. Andreotti is fixing the maximum amount he can pay monthly in 2.000.

What is the maximum amount that Mr. Andreotti should pay? Show the calculations and explain why. (15 points)

What is the total amount that Mr. Andreotti will pay in total after 40 years? (15 points)

What is the present value of the rental contract offered by the owner as option A? (15 points)

Mr. Andreotti believes that he might be interested in selling the apartment in 40 years time, this is when he is planning to retire.

If the interest rates remain at the existing level, what will be the price of the apartment in that moment? (15 points)

Mr. Andreotti is very happy for knowing how to calculate future values and present values, because this helps him in taking this type of decisions. Having said that he wonders what the future value of the rental contract could be. Can you help him? Explain your answer and show your calculations. (10 points)

6) We are still thinking that the price of the apartment is very expensive, we believe we could convince the bank of making payments only once a year, at the end of the year. The interest rate would still be the same 2.4%, how much money have we saved with this action?

a) In the payments for each year? b) in the total amount paid for the whole period? c) what is the present value of the savings?