BUSA 3200 Worksheet on Interest and Mortgage Loans Amount 219303 Amount 219303 BUSA 3200: Worksheet on Interest and Mortgage

BUSA 3200 Worksheet on Interest and Mortgage Loans (Amount + $219,303)
Amount = $219,303
BUSA 3200: Worksheet on Interest and Mortgage Loans
This is a ten point supplemental assignment due one week after we finish chapter 5
Do
xadnot start this worksheet until you’re asked to do so either in online instruction or in class!
Congratulations! You’ve won a
moderately large lottery. Being a
sensible person, you pay your taxes, perhaps pay off some credit card
balances, buy a few nice things for yourself, but save the rest for
investment.
1. What is the amount of your investable lottery winnings?
(You will be furnished with this amount.)
= $219,303
2. What average annual rate of return do you believe you can earn on
your investment? At the bottom of the page, state why you chose this rate.
3. If you earn you expected return and make no withdrawals, how much
will you have in 30 years?
4. How much total interest will you have earned?
5. How much average interest have you earned each year?
6. Suppose you retire in thirty years and put your investment into an
annuity paying 5
% annually. You expect
to live another 30 years. How much can
you then take out each year before you exhaust your investment?
But wait!! Suddenly you find
your dream house, and it costs exactly the amount you have to invest from
line 1. And since you have the cash,
you don’t even have to take out a mortgage! But you still wonder whether it might be better to hold on to the cash
and take out a mortgage after all.
7. 30 Year
Mortgage Rate
Please use 4.5
%.
8. Monthly
Mortgage Payment
9. Total Amount
paid
10. Total interest Paid
11. Average Interest per Year
On a separate page, tell me your decision. Will you take out a mortgage or pay cash for the house? Tell me your reasoning in making your decision, and discuss the risks you face. I anticipate an answer of two or three paragraphs, not exceeding a typed page.

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