Upon graduation, you’ve landed a good long-term job with amajor corporation. Your first investment is a house with a totalfinanced cost of $350,000. Since the fixed interest rate is so lowfor 30-year loans, an amazing 3%/year/month, you decide to pay offthe note in 30 years with 360 equal end of month payments. Answerthe following questions:
a). What are the monthly mortgage payments for principal andinterest?
b). What portion of the 120th payment is interest?
c). What portion of the 120th payment is principalrepayment?
d). What is the remaining balance immediately after the 12thyear (144th payment)?
e). If you choose to payoff the loan at t=84, how much mustyou pay?
Additional Problem #2:
CHANGING INTEREST RATE PROBLEM
Trans-Star, a spin-off company of MOPAR, supplies majorautomobile transmission components to auto manufacturers worldwideand is Mopar’s largest supplier. A Trans-Star Engineer has beentasked with evaluating bids for new-generation CNC machinery to bedirectly linked to the automated manufacturing of high-precisiontransmission band components. The following are three interestrates that are included in the Vendor bids. Trans-Star will makepayments on a semiannual basis only. The engineer is confused aboutthe effective interest rates-what they are annually and over thepayment period of 6-months. Answer the following questions:
Bid #1: 8.25% per year, compounded monthly
Bid #2: 7.60% per year, compounded quarterly
Bid #3: 2.25% per quarter, compounded quarterly
a.) Calculate the effective semiannual interest rate for ALLthree bids.
b.) Calculate the effective annual interest rate for ALL threebids.
