You are applying for a 30-year, fixed-rate (APR 6.50%) mortgage loan for a house that sells for $80,000 today. The mortgage bank will ask you for 20% initial down payment of the house value, and charge you an extra $3,000 closing cost (carried into loan balance and amortized later) when the loan is approved.

• aWhatshouldbeyourmonthlyloanpayment(assumingpaymentisduebytheendofeachmonth)?

(b) 10 years after the house purchase (remember, this is still a monthly mortgage), what will be the remainingprincipalbalance of your loan?

(c) 10 years after the house purchase (as Part b aforementioned), the loan market rate drops from 6.50% APR to 4.50% APR, you want to refinance on the remaining loan principal balance, but the bank will charge you an extra $4,000 refinancing fee (which is carried into the remaining loan balance and then amortized over the rest of loan life). By how much would you be able to lower your monthly loan payment if you choose to refinanceover the remaining loan life(i.e., instead of the extension of another 30 years)?

By the end ofeach year, you contribute an equal amount of $3,000 to your retirement fund portfolio, which on average earns an annual return of 12.5%. The contribution continues until your retirement.

30 years later you retire, how much money do you have in your portfolio by then?

(b) For your post-retirement life (which last approximately another 20 years), every year you withdraw and spend an equal amount of annuity payment from your trust fund account. What would be theannualpayment amount you receive if you plan to leave no money to your heirs?

(c) Considering the long-term inflation rate amounts to 3.5% annually, how much moneyat real purchasing powerwill you actually have when you retire? How much should you withdraw and spend per yearat real purchasing powerfor your post-retirement life?