It is not uncommon for the owner of a home to receive a letter similar to the one shown below. Write a paper based on this letter. Different members of your group can work on different parts of the question, but you should submit one paper from your group.

a. What is the letter about?

b. A computer printout (shown above) was included with the letter. Assuming that these calculations are correct, discuss the advantages or disadvantages of accepting this offer.

c. The plan as described in the letter costs \(\$ 375\) to sign up. I called the company and asked what their plan would do that I could not do myself by simply making 13 payments a year to my mortgage holder. The answer I received was that the plan would do nothing more, but the reason people do sign up is because they do not have the self-discipline to make the biweekly payments by themselves. Why is a biweekly payment equivalent to 13 annual payments instead of equivalent to a monthly payment?

d. The representative of the company told me that more than 250,000 people have signed up. How much income has the company received from this offer?

e. You calculated the income the company has received from this offer in part \(\mathbf{d}\), but that is not all it receives. It acts as a bonded and secure "holding company" for your funds (because the mortgage company does not accept "two-week" payments). This means that the company receives the use (interest value) of your money for two weeks out of every month. This is equivalent to half the year. Let's assume that the average monthly payment is \(\$ 1,000\) and that the company has 250,000 payments that it holds for half the year. If the interest rate is 5\% (a secure guaranteed rate), how much potential interest can be received by this company?

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Dear Customer: Previously we provided you an enrollment package for our BiWeekly Advantage Plan. We have had an excellent response from our mortgagors, yet we have not received your signed enrollment form and program fee to start your program. How effective is the BiWeekly Advantage Plan? Reviewing your loan as of the week of this letter we estimate: MORTGAGE INTEREST SAVINGS OF $99,287.56 LOAN TERM REDUCED BY 7 YEARS. Many financial advisors agree it is a sound investment practice to pay off a mortgage early, particularly in light of growing economic uncertainty. Act today! Don't let procrastination or indecision deny you and your family the opportunity to obtain mortgage-free homeownership sooner than you ever expected. Please call us toll-free at 1-800-555-6060 if you would like more information about our BiWeekly Advantage Plan and a free personalized mortgage analysis. Our telephone representatives are available to serve you from 9 am to 5 pm (EST). Sincerely, Interest Rate: Current Balance: Monthly Payment: 8.3750 $ 416,640.54 $ 3,180.91 Homeownership: Remaining Terms Years 29 Months 5 22 5 0 Current Payment Plan BiWeekly Plan REDUCTION 7 Total Remaining Principal & Interest Payments: Current Payment Plan $ 1,122,849.24 BiWeekly Plan $923,561.68 INTEREST SAVINGS $199,287.56