Question: The future value of $1,000 compounded annually for 8 years at 12% can be calculated with the following formula: FV = $1,000 * (1 +

The future value of $1,000 compounded annually for 8 years at 12% can be calculated with the following formula:

FV = $1,000 * (1 + 12%)8

If the same $1,000 was compounded quarterly, what formula would you use to calculate the FV?

16. An investment that costs $105,000 today is expected to produce the following cash inflows over each of the next five years: $20,000; $25,000; $23,000; $22,000; $21,000. What is the IRR for this investment correct to 1 decimal place of %? (Hint: IRR is between 1% and 2%)

17. A borrower takes out a 30-year mortgage loan for $250,000 with an interest rate of 5%. What would the monthly payment be?

18. A borrower takes out a 30-year mortgage loan for $250,000 with an interest rate of 5% and monthly payments. What portion of the first month's payment would be applied to interest?

19. How do the interest rate risk and default risk of an ARM (adjustable rate mortgages) lender compare with that of a FRM (fixed rate mortgages) lender?

20. One of the most popular amortizing mortgages today is the constant payment mortgage (CPM). What are the characteristics of the components (interest, amortization, payment) of the CPM payment over the life of the loan?

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