The Morgan Company plans to borrow money to purchase an office building for its headquarters. The building it has selected has a price tag of $10 million. The company will make a down payment of $2 million and take a first mortgage on the balance of $8 million. The lender agrees to provide a 30-year mortgage on the principal of $8 million at an annual interest rate of 10 percent, compounded monthly, with monthly payments at the end of each month. How much will Morgan pay monthly on their mortgage?

a. The CFO of the Morgan Company wants to know how much interest the company will pay on its $8 million mortgage during the first year of the mortgage, and how much the company will pay toward reducing the principal during the first year.

b. For planning purposes, the CFO of the Morgan Company (see preceding example) needs a table and chart that show how the annual payments to interest and to principal change during each of the 30 years of the mortgage.