2. Kate will purchase a house for $500,000 with a 10% down payment and $10,000 in closing costs. The closing costs are included in the loan. A 10-year loan is arranged at 5% interest compounded monthly.

(a) What is the monthly payment?

(b) By choosing to include the closing costs in the loan, how much money was paid in interest on the closing costs over the life of the loan.

(c) What is the effective interest rate for this loan? (Hint: you must take into account the monthly compounding AND the closing costs.)

(d) Suppose closing costs were paid at closing. How does this change the overall cost of the loan? How does this change the effective interest rate?

(NOTE: EVERYTHING SHOULD BE DONE IN EXCEL. OTHERWISE NO POINTS. INCLUDE THE FUNCTION USED AS WELL. IF ITS POSSIBLE INCLUDE THE SPREADSHEET FILE AS WELL)




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