Question one: Casino.com Corporation is building a $25 million office building in Las Vegas and is financing the construction at an 80 percent loan-to-value ratio, where the loan is in the amount of $20,000,000. This loan has a ten-year maturity, calls for monthly payments, and is contracted at an interest rate of 8 percent.

Using the above information, answer the following questions.

1. What is the monthly payment?

2. How much of the first payment is interest?

3. How much of the first payment is principal?

4. How much will Casino.com Corporation owe on this loan after making monthly payments for three years (the amount owed immediately after the thirty-sixth payment)?

Question Two: Kim Edwards and Chris Phillips are both newly minted 30-year old MBAs. Kim plans to invest $1,000 per month into her 401(k) beginning next month, while Chris intends to invest $2,000 per month, but he does not plan to begin investing until 10 years after Kim begins investing. Both Kim and Chris will retire at age 67, and the 401(k) plan averages a 12 percent annual return compounded monthly. Who will have more 401(k) money at retirement?

Question Three: Joan Wallace, corporate finance specialist for Big Blazer Bumpers, has been charged with the responsibility of funding an account to cover anticipated future warranty costs. Warranty costs are expected to be $5 million per year for three years, with the first costs expected to occur four years from today. How much will Joan have to place into an account today earning 10 percent per year to cover these expenses?

Question Four: Joan Messineo borrowed $15,000 at a 14 percent annual interest rate to be repaid over three years. The loan is amortized into three equal annual end-of-year payments.

a. Calculate the annual end-of-year loan payment.

b. Prepare a loan amortization schedule showing the interest and principal breakdown of each of the three loan payments.

c. Explain why the interest portion of each payment declines with the passage of time.