Problem:
You pay down 20% on a home with a purchase price of $180,000. The bank will loan you the remaining balance of $144,000 at 7% APR. You have an option to make annual payments or monthly payments on the loan. Both options have a 30-year payment schedule.
Required:
Question 1: What is the annuity payment under the annual plan?
Question 2: What is the annuity payment under the monthly plan?
Note: Provide support for your underlying principle.