The time value of money, Larry Davis borrows $80,000 at 14

The time value of money

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Reference no: EM1350243

Larry Davis borrows $80,000 at 14% interest toward the purchase of a home. His mortgage is for 25 years.

a. How much will his annual payments be? (Although home payments are usually on a monthly basis, the analysis here needs to be on an annual basis for ease of computation. Compute a reasonably accurate answer.)

b. How much interest will he pay over the life of the loan?

c. How much should he be willing to pay to get out of a 14% mortagage and into a 10% mortgage with 25 years remaining on the mortgage?

Assume current interest rates are 10%.
Carefully consider the time value of money.
Disregard any taxes.

Reference no: EM1350243

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