The project for this class revolves around making a financial decision by employing some of the major concepts and applications covered in the class.
Assume that you are currently employed. You expect 5 percent annual increases in your salary. Assume also that all your taxes and deductions place you on a flat 20 percent tax rate. Your plan is to buy your first house five years from now at a projected price of 5 times your annual salary at the time of purchase. You start now to set aside $613 every month in an account that will earn 12 percent nominal rate annually in order to accumulate enough money for reasonable down payment. You have been pre-approved for a 5-year, 12 percent conventional mortgage loan provided that your debt ratio does not exceed 40 percent at the time of actual financing. The mortgage agreement provides that you will provide evidence of a homeowner's insurance and be responsible for your property taxes. Just two months into your mortgage payments, you win a lottery jackpot and decide to pay off your mortgage loan.
1. Project your annual and take home pay for the next five years.
2. Project the amount of money in the saving account for your down payment in five years.
3. Prepare and income/expenditure statement and show your debt ratio.
4. Project the price of your house in five year and the amount financed after the down payment.
5. Prepare your amortization statement until the mortgage is paid off after two months.