Calculate annual payments for each option

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Reference no: EM131974476

Question: (a) Find the PV of an ordinary annuity that pays $4000 at the end of each of the next 5 years if the interest rate is 7%. Then find the FV of that same annuity.

(b) Suppose the company buys the property for $2.8 million and tooks out a mortgage for $2 million. You have two repayment options. Option 1: Repay in 15 years at rate of 4.85% or Option 2: Repay in 30 year at rate of 6.25%. Calculate annual payments for each option. Set up an amortization schedule for Option 1 that shows the annual payment, and the amount of each payment that repays the principal, and the amount that constitutes interest expense to the borrower and interest income to the lender.

Reference no: EM131974476

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