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You have decided to purchase a house for $400,000 and are evaluating your options for the mortgage. Assume that your down payment will be 20%

You have decided to purchase a house for $400,000 and are evaluating your options for the mortgage. Assume that your down payment will be 20% of the purchase price, payments will be made monthly, and the first payment will be made one month from today. What is the mortgage amount? If you select the 30-year mortgage, the interest rate will be 3% annually. What is the payment amount? Suppose that the bank is also offering a 15-year mortgage at 4.125% annually. What is the monthly payment on this mortgage? What is the total of all payments for each mortgage? Which one costs you the least over the life of the mortgage? 2. Given the following set of cash flows: Period Cash Flow 1 $35,000 2 $30,000 3 $25,000 4 $20,000 5 $15,000 If your required rate of return is 7% per year, what is the present value of the above cash flows? Future value? Now, suppose that you are offered another investment that is identical, except that the cash flows are reversed (i.e., cash flow 1 is 15,000, etc). Is this worth mor

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