The McDonalds are at the bank in order to negotiate a loan to buy a farm where they can raise cows, horses, chickens sheep and plant spaghetti trees. They have managed to save $45,000 that they can use as a down payment. The McDonalds would like to finance their purchase over 25 years making bi-weekly payments. They can afford to make a maximum payment of $1,275 every 2 weeks. The bank is offering a 25-year amortized mortgage loan at 4.75 percent with a 5-year term. (Hint: There are 52 weeks in a year).
(a) Calculate the maximum price the McDonalds can pay for their farm.
(b) Prepare an amortization schedule for the first 5 payments of the McDonalds’ mortgage.
(c) At the end of the 5-year term of their mortgage, how much will the McDonalds owe on their mortgage?