You have just negotiated a 5 year mortgage on $400,000 amortized over 25 years at a rate of

3.5%. After 5 years assume that the mortgage rate remains the same but you increase the

payments by 500 dollars per month, in how many periods ( months) will you be able to pay the

whole amount.

Discuss

a) How likely are you to have the situation where the mortgage rate remains at 3.5%.

b) At the time of purchase you and your partner who will also be on the contract have an annual

gross income of 100,000 do you think it is advisable to get a 400,000 mortgage

c) What is the chance that you will be able to pay 500 extra dollars per month after 5 yrs.

d) bank suggest you purchase a life insurance of 50 dollars per month for each one of you should

you consider it .

5 When you retire, you would like to have a monthly pension of $8,000 per month for 30 years. Assume

you have just had your 25th birthday and you intend to contribute monthly to your retirement fund until

you are 60. The month after that you will start taking your pension. Your investment advisor has found a

guaranteed investment for your fund that will yield 8% per year compounded quarterly ( hint: you need

to find equivalent effective monthly rate to be used for calculation purposes) for the duration of your

pension needs. How much should you contribute each month to your retirement fund, assuming your

contributions start one month after your 25th birthday?

Discuss

How likely are you to get a return of 8%, what is most likely average return over the next 50 or so years.

How much money do you think you will need on an annual basis in retirement

Do you think you can bank upon the govt old age pension plan to pay you at the time of retirement