Unformatted text preview: c. If Mike plans to spend these savings in even amounts over the subsequent 20 years, how much can he spend each year? 8. You have just purchased a home and taken out a $500,000 mortgage. The mortgage has a 30-year term with fixed monthly payments and an APR of 6% (monthly compounding). a. How much will you pay in interest, and how much will you pay in principal, during the first year? b. How much will you pay in interest, and how much will you pay in principal, during the twentieth year (i.e., between 19 and 20 years from now)? 9. Your firm is purchasing a new telephone system, which will last for four years. You can purchase the system for an upfront cost of $150,000, or you can lease the system from the manufacturer for $4,000 paid at the end of each month. Your firm can borrow and lend at an interest rate of 5% APR with semi-annual compounding. Should you purchase the system outright or pay $4,000 per month?...
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- Fall '10
- Mathematical finance, Mike Polanski, Finance Class Assignments