Question

Problem #7: 4 Points What is the present value of the following uneven cash flow stream: $-500 now (at time 0), $100 in year 1 (at time 1), $300 in year 2 lat time 2). $350 in year 3 (at time 3), $400 in year 4 (at time 4) if the expected return is 7.2% lie.. rate of interest)? (Hint: solve for net present value using your calculator or Excel) Problem #8: 5 Points You are interested in purchasing the Malibu home below. Using all of the information below, how much principal would you pay during month 2?_ Information: $18mill home price, 20% down payment, 30 year fixed, monthly mortgage, 4.44% mortgage rate. Assume 2 years go by, how much do you now owe to the bank (.e., what is your ending mortgage balance after 2 years)? Hint: you can solve this on the calculator without a spreadsheet by changing N. Problem #9: 5 Points Home Mortgage Payment, Interest, and Principle You are interested in living near Biola for generations to come. You find a $700,000 home near the school. Assuming you put 10% down, what is your monthly payment? How much of your very first payment is interest? How much is principle? Assume you receive a 30 year fixed mortgage, paid monthly, with a rate of 4.5%.

Answer 1

7)

Year Cash flow 0 $ (500) 1 $ 100 2 $ 300 3 $ 350 4 $ 400 [email protected]% 1.0000 $ 0.9328 $ 0.8702 $ 0.8117 $ 0.7572 $ Present value (500.00) 93.28 261.05 284.11 302.89 Net present value $ 441.33

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