You are about to purchase a house. The price of the house is $400,000. You put $40,000 down payment on the house and take out a $360,000 mortgage. You can get a 15-year fixed rate mortgage at 6% APR. You decide to buy 2 points to reduce this rate. Your PMI payment is $200/month and will be needed as long as LTV is more than or equal to 80%. The property taxes and casualty insurance are estimated at $300 and $100 per month, respectively; these costs are paid as escrow payments on a monthly basis together with the mortgage payment. You are estimating $2,500 in closing fees. The appraised value of the house is expected to rise at a monthly rate of 0.3%. You are in the 28% tax bracket. Tax credits for property taxes and interest payments in a given year will be received at the end of the year (or beginning of next year). You took out the mortgage and bought the house on 1/01/2018. The first payment of the mortgage was due on 2/01/2018. You will sell the property on 1/01/2021 at appraised value and pay off the remaining loan balance. MARR is 12% per year compounded monthly.

Fill out the following table and answer the following questions. You can copy-paste from your spreadsheet to the table (but do not submit your spreadsheet).

(a) What is your mortgage rate after you buy 2 points?

(b) For how many months do you have to pay PMI?

(c) How much do you have to pay at closing (including down payment, closing fee, and cost of 2 points)?

(d) What is your monthly mortgage and escrow payment (excluding PMI)?

(e) What is the present value of all these transactions on 1/01/2018?