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Problem 9-44 Loan repayment [LO9-4] Larry Davis borrows $74,000 at 10 percent interest toward the...

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Finance

Problem 9-44 Loan repayment [LO9-4]

Larry Davis borrows $74,000 at 10 percent interest toward the purchase of a home. His mortgage is for 20 years. Use Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods.

a. How much will his annual payments be? (Although home payments are usually on a monthly basis, we shall do our analysis on an annual basis for ease of computation. We will get a reasonably accurate answer.) (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

b. How much interest will he pay over the life of the loan? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

c. How much should he be willing to pay to get out of a 10 percent mortgage and into a 8 percent mortgage with 20 years remaining on the mortgage? Assume current interest rates are 8 percent. Carefully consider the time value of money. Disregard taxes. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

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