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Suppose a bank decides to make a mortgage loan to an individual so that she may...

Suppose a bank decides to make a mortgage loan to an individual so that she may purchase a home. The homeowner will pay the bank $1,500 per month in mortgage payments for the next thirty years. The bank will collect the mortgage payments at the end of the month. What is this promised stream of cash flows worth to the bank today if they could reinvest the monthly income at an annualized rate of 4.29% for the entire investment horizon?

A) $303,469

B) $315,988

C) $279,422

D) $127,444

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Answer #1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

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