1. You are choosing between a 15 year fully amortizing fixed rate constant payment loan with a 3.15% rate and a 30 year fixed rate loan with a 3.40% rate. In either case you would borrow $400,000.
If you plan to only hold which ever loan you select for 10 years (i.e. you will make 120 payments), how much larger will the outstanding balance be at time of repayment on the 30 year loan versus the 15 year loan? State your answer as a positive number rounded to the nearest cent.
2. You wish to borrow $2,000,000 to finance the construction of a small multi-family investment property. A lender is willing to give you a 10 year fixed rate fully amortizing loan at 4.5%. In what month will you have paid back exactly half of your principal balance? Always round up to the nearest month, payments are always at discrete intervals (no payments will be made in the middle of any month). State your answer as a whole number.
(Hint: you want to find the N when the outstanding balance is 1M and subtract that from 120, your total number of scheduled payments)