You are purchasing a house for $400,000. You plan to make a down payment of $80,000 and finance the rest with a mortgage. You must choose between two 30-year loan packages; Package #1 has an annual interest rate of 4.5% and requires you to pay two “points” ($6400). Package #2 has an annual interest rate of 4.75% but no “points”. Calculate the annual payment (PMT), the total payments over the 30-year period (SUM), and the IRR of each loan package. Which loan is a better deal for you and why?

Your friends are setting up a college fund for their young daughter and are asking your advice. They plan to deposit $4000 annually (on January 1st) for the next 14 years. Their investment program will pay 6% annually on their deposits .They will then need to make college payments in the amount of $28,000 annually on January 1st for the next four years. Determine if their plan is reasonable. Use PV and PMT to determine what amount your friends need to deposit annually to fund this college plan.

Answer rating: 100% (QA)

1 Package 1 PMT 1900899 SUM 68026341 IRR 450 Package 2 ... View the full answer