You are considering the purchase of a exist500,000 home. You plan to take a 30-year fixed mortgage after making a 20% downpayment to avoid PMI. Payments are to be made monthly (at the end of the month) and the APR is 8%. 1. What is the monthly payment? 2. During what month does the principal portion first exceed the interest portion? Are you surprised by your answer? 3. How long does it take to pay off your mortgage if you pay an additional exist300 towards principal each payment? 4. How long does it take to pay off your mortgage if you pay an additional amount each month equal to the current months principal? Your child was just born and you are planning for his/her college education. Based on your wonderful experience in Financial Economics you decide to send your child to Hofstra University as well. You anticipate the annual tuition to be exist60,000 per year for the four years of college. You plan on making equal deposits on your childs birthday every year starting today, the day of your childs birth. No deposits will be made after starting college. The first tuition payment is due in exactly 18 years from today (the day your child turns 18 - no deposit required, i.e. last deposit is on 17th birthday). Assume the annual expected return on your investments is 10% over this period. 1. Calculate the annual deposit. FV (deposits) = PV (tuition payments) 2. Calculate the amount needed if only equal annual deposits are made on birthdays 5-10 inclusive FV (deposits) = PV (tuition payments as lump sum) 3. Calculate the amount needed if two equal annual deposits are made on birthdays 5 and 13. 4. Answer part (i), now assume tuition rises 10% per year. 5. Answer pan (i) assuming first deposit will be made on your childs 1st birthday. All other information is the same. What is the annual tuition payment? How does it compare to part (i)? your answer surprising