1. The Keller's discovered that they could reduce their mortgage interest rate from 10% to 4%. The value of homes in their neighborhood has been increasing at the rate of 5% annually. If the Keller's were to refinance their house with $3,000 in closing costs added to their current mortgage balance ($277,000) over a period of time which coincides with their chosen retirement age in 20 years, what would be their new monthly payment including principal and interest?
A. $1,672.99.
B. $1,678.56.
C. $1,691.11.
D. $1,696.74.
2. Assume that you own an annuity that will pay you $15,000 per year for 12 years, with the first payment being made today. You need money today to start a new business, and your uncle offers to give you $156,000 for the annuity. If you sell it, what rate of return would your uncle earn on his investment?
a. 2.42%
b. 3.31%
c. 2.72%
d. 2.15%
e. 2.77%