To buy a new house, you must borrow $150,000

Question 1

To buy a new house, you must borrow $150,000. To do this, you take out a $150,000, 20-year, 10% mortgage. Your mortgage payments, which are made at the end of each year (one payment each year), include both principle and 10% interest on the declining balance. What amount will your annual payment be?

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Question 2.

You are given three investment alternatives to analyze. The cash flows from these three investments are as follows:

End of year

A B C

1. 1,000 1,000 5,000

2. 2,000 1,000 5,000

3. 3,000 1,000 (5,000)

4. (4,000) 1,000 (5,000)

5. 4,000 3,000 15,000

What is the present value of investments A, B, and C if the appropriate discount rate is 10%?