1. You are seeking a fixed-rate mortgage of $750,000 with a term of 30 years. Your bank quotes an APR of 12.0 percent, compounded monthly. You can only afford monthly payments of $7,200, so you offer to pay off any remaining loan balance at the end of the loan term in the form of a single balloon payment. What will be the amount of the balloon payment? NOTE: The balloon payment will include the last payment of $7,200.

2. How much would a bank be willing to loan if the borrower offered terms of repaying $1,000 every other year for 40 years (i.e. first payment 2 years from today, the second payment is received 4 years from today, etc.) and the relevant rate of interest is 5% per year, compounded annually?