Aborrower can obtain an 80 percent loan at an 8 percent interest rate with monthly payments. the loan is to be fully amortized over 25 years. alternatively, he could obtain a 90 percent loan at an 8.5 percent rate for the same loan term (i. e., 25 years.) the borrower plans to stay in the home for the entire loan term. note: the dollar amount of the two alternative loan amounts is irrelevant. to show this, the answer key will solve this problem for two loan amounts—$200,000 and $500,000. you should solve this problem using both numbers and verify that the original loan amount is irrelevant. a) what is the incremental cost of borrowing the additional funds? b) how would your answer change if you were charged two points on the 90 percent loan? c) how would your answer change if you planned to be in the home only five years?

Suppose there are three types of consumers who attend concerts at your university’s performing arts center: students, staff, and faculty. each of these groups has a different willingness to pay for tickets; within each group, willingness to pay is identical. there is a fixed cost of $1,000 to put on a concert, but there are essentially no variable costs. for each concert: i. there are 140 students willing to pay $20. (ii) there are 200 staff members willing to pay $35. (iii) there are 100 faculty members willing to pay $50. a) if the performing arts center can charge only one price, what price should it charge? what are profits at this price? b) if the performing arts center can price discriminate and charge two prices, one for students and another for faculty/staff, what are its profits? c) if the performing arts center can perfectly price discriminate and charge students, staff, and faculty three separate prices, what are its profits?