1. A homeowner can obtain a $200,000 thirty year fixed rate mortgage at a rate of 6.5% with zero points or at a rate of 6.0% with 2 points. If you will keep the mortgage for 30 years, what is the net present value of paying the points?
2 .A firm just paid a dividend of $1. For the next 3 years, the dividend is expected to grow at a high rate of 100%. After that, the expansion of operation will slow down and dividend will grow at a stable rate of 10%, indefinitely. The required rate of return is 20%. What is the current stock price?
3. A homeowner could take out a 15-year mortgage at a 3.5% annual rate on a $125,000 mortgage amount, or she could finance the purchase with a 30-year mortgage at a 4.0% annual rate. How much total interest over the entire mortgage periods could she save by financing her home with the 15-year mortgage?