You have found a condo in Hoboken you would like to buy that costs $500,000. Your mortgage banker offers you three choices for a mortgage and is willing to finance 100% of the purchase.

a) 30-year fixed rate loan, with an annual rate of 4.75% and with fixed monthly installments

b) 5-year fixed rate loan, with an annual rate of 3.25%, fixed monthly installments and a one-time (balloon) payment of $400,000 at the end of the loan.

c) 15-year fixed rate loan, with an annual rate of 3.5% and fixed monthly installments

1. Create an Excel spreadsheet and calculate how your interest payments, principal payments, and the outstanding loan balance changes over time for each of these options (20 points) (You do NOT need to print the entire excel sheet; just few cells from the beginning and end would be enough. However, you should explain your approach.)

2. Under which option/s would you walk away from your condo if prices fell by 10% of the original purchase price by the end of year 4? Assume no other costs to walk away. (10 points)

3. Assume that your budget allows you to afford $3,200 in monthly payments and you want to pay principal down as quickly as possible. Which option would you choose? (10 points)