Question

Logan Green decided to build an earth friendly home. He owned the land, but had to seek financing to cover the cost of construction. Conglomerate Mortgage Company offered him a construction loan where no payments were made until one month after the certificate of occupancy was issued. After that the loan would convert to a standard 30 year fixed rate mortgage. Logan borrowed a lump sum of $416100 at 4% per year compounded monthly. Logan received his certificate of occupancy exactly 12 months after taking out the loan.

a. What are his monthly payments? $

b. How much interest does he pay in the first full year of making payments? $

Ten years ago Franky Frugal bought some 20-year treasury bonds for $200,000. The bonds will pay $4000 per year for 20 years, and at the end of 20 years he will receive his last payment plus his original $200,000 back. Unfortunately Franky's wife is really ill, and he needs all of the money he can get to pay his bills. hE decides to sell his bond. The current rate on a 10-year T-bond is 6.17% per year.

a. What is the current value of his bonds? $

Answer 1

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