You want to buy a house that costs $320,000. You have $32,000for a down payment, but your credit is such that mortgage companieswill not lend you the required $288,000. However, the realtorpersuades the seller to take a $288,000 mortgage (called a sellertake-back mortgage) at a rate of 5%, provided the loan is paid offin full in 3 years. You expect to inherit $320,000 in 3 years, butright now all you have is $32,000, and you can afford to makepayments of no more than $25,000 per year given your salary. (Theloan would call for monthly payments, but assume end-of-year annualpayments to simplify things.)

1. If the loan was amortized over 3 years, how large would eachannual payment be? Do not round intermediate calculations. Roundyour answer to the nearest cent.

   $  

   Could you afford those payments?
   -Select-No, the calculated payment is greater than the affordablepayment.Yes, the calculated payment is less than the affordablepayment.No, the affordable payment is greater than the calculatedpayment.Yes, the calculated payment is greater than the affordablepayment.Item 2

2. If the loan was amortized over 30 years, what would each paymentbe? Do not round intermediate calculations. Round your answer tothe nearest cent.

   $  

   Could you afford those payments?
   -Select-Yes, the calculated payment is less than the affordablepayment.No, the calculated payment is greater than the affordablepayment.No, the affordable payment is greater than the calculatedpayment.Yes, the calculated payment is greater than the affordablepayment.Item 4

3. To satisfy the seller, the 30-year mortgage loan would bewritten as a balloon note, which means that at the end of the thirdyear, you would have to make the regular payment plus the remainingbalance on the loan. What would the loan balance be at the end ofYear 3, and what would the balloon payment be? Do not roundintermediate calculations. Round your answers to the nearestcent.

   Loan balance: $  

   Balloon payment: $