Question: FINC3304 (BUSINESS FINANCE) Final Project - Fall 2017 Instruction: You

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Question:

FINC3304 (BUSINESS FINANCE)

Final Project - Fall 2017

Instruction:

  

You need to work on the mini-projects in Excel. Your final mini-project report should be well-organized and typed in a Word file. Are required to submit both your Word report and Excel files to the instructor using the mini-project submission tool in Blackboard. The style and organization of the project accounts for 10 points.

Mini-Project 1: Mortgage Loan Analysis (60 points):

You plan to buy a house in Houston in January 2018. The sale price is $350,000. You need to pay 20% down payments and borrow additional 80% from Wells Fargo with a 20-year, 3.6% fixed-rate mortgage loan. You are expected to pay an equal MONTHLY payment starting from March 2018 for a total of 20 years.

(1) Calculate your expected monthly mortgage payment.

(2) Develop the 2018~2038 amortization table for your mortgage.

(1)   When you prepare my 2018 tax filing, what is the total mortgage interest payment that you can consider for the tax deduction?

Explanation / Answer

(1) Expected Monthly Mortgage Payment

(2) 2018-2038 AmortizationTable

(3) Total Mortgage Interest to be considered for tax deduction during tax filing of 2018

Total Deduction = $ 8,291

Sale Price = $350,000 Down Payment = $70,000 (20%) Financed Amount = $280,000 (80%) Mortgage Loan taken = $280,000 Rate of interest p.a. = 3.60% Monthly Rate of Interest = 0.30% No. of installments = (20 yrs x 12 months) 240 Discount Factor = 0.0030 Present Value Annuity Factor of 0.30% for 240 periods (PVAF) = 170.9076059 or 170.9076 Equated Monthly Installments = Loan Amount/PVAF(0.30%, 240 periods) =$280,000/170.9076059 $            1,638

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