BTU Inc. is thinking of purchasing a house. The house costs $350,000. The firm has $50,000 in cash that it can use as a down payment on the house, but it needs to borrow the rest of the purchase price. The bank is offering a 30-year mortgage that requires annual payments and has an interest rate of 7% per year. What will the firm’s annual payment be if it signs up for this mortgage?
BTU Inc. would like to buy the house and take the mortgage described in Problem 9. The firm can afford to pay only $23,500 per year. The bank agrees to allow the firm to pay this amount each year, yet still borrow the same amount as in 9. At the end of the mortgage (in 30 years), the firm must make a balloon payment; that is, it must repay the remaining balance on the mortgage. How much will this balloon payment be?