The apartment was owned and had been promoted by a state-owned construction company and was offering two alternatives:

Option A: renting the apartment with a perpetual contract, meaning for ever. The Marconi family thought that could be a good solution for them.

The family was very happy living in that area, and they had the chance to live there forever at an offered price of 1.600 the first month, and the rent price will be growing by a 0.1% monthly.

At the same time, they were not forced to ask for a loan, which represented a heavy burden off the Marconis.

Option B: consisted in acquiring the property with a mortgage scheme for 40 years. The total price of the apartment is 800.000. The family can pay an initial down payment of 200.000 and the rest (600k) to be paid in constant monthly payments with an annual interest rate of a 2.4% compounded monthly.

Mrs. Marconi establishes the maximum amount they can pay monthly as 2.000.

7) The family is still thinking that the monthly payments theyll have to afford during the next forty years are too much, and they believe they could convince the seller of making payments only once a year, at the end of each year. The interest rate would still be the same 2.4%.

How much money will they save with this action?

a. What is the amount of the yearly payment to be done? (10 points)

b. What is the total amount theyll have paid in total after 40 years? (10 points)

c. How much has the family saved (if any) by paying it yearly instead of monthly? (10 points)