1. Calculate the present worth of a $ 580,000 home with a mortgage rate of 5% compounded monthly for 25 years and growth rate of 2% every year over the whole amortization period. The down payment is 5%. Assuming you can rent the basement for $1000 and 2% growth rate every year. What is the present worth of the rent accumulated over 25 years? All Values must be present worth.

1. Calculate the present worth of a $ 580,000 home with a mortgage rate of 5% compounded monthly for 25 years and growth rate of 2% every year over the whole amortization period. The down payment is 5%. Assuming you can rent the basement for $1000 and 2% growth rate every year. What is the present worth of the rent accumulated over 25 years? All Values must be present worth.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Suppose you take out a 30-year mortgage for $ 225000 at 8.5% interest. The monthly payments on this loan are $ 1730.06. If you pay an extra 40% per month on your mortgage, how soon will you pay off the loan?New length in years = How much will you save in interest by making the extra payments?Saving = If you put $ 1730.06 per month into an annuity earning 10.25% interest compounded monthly for the remaining time on your original loan, how much money will you have at the end of the original 30 years?Extra savings =
1.1) For $20,000, you can purchase a five-year annuity that will pay $5000 per year for five years. The payments occur at the end of each year. a) Calculate the effective annual interest rate implied by this arrangement. 1.2) If you invest $1000 at 11% APR for five years, how much would you have at the end of 5 years? a) Calculate using simple interest. b) Calculate using compound interest.
A borrower is purchasing a property for $180,000 and can choose between two possible loan alternatives. The first is a 90% loan for 25 years at 9% interest and 1 point and the second is a 95% loan for 25 years at 9.25% interest and 1 point. Assuming the loan will be held to maturity, what is the incremental cost of borrowing the extra money? O 12.01% O 14.34% 13.50% O 13.66%
You buy a house for $230000, and take out a 30-year mortgage at 6% interest. For simplicity, assume that interest compounds continuously. A) What will be your annual mortgage payment? $ per year %24
Considering the following information, what is the NPV if the borrower refinances the loan? Expected holding period: 3 years; current loan balance: $400,000; current loan interest: 5.875%; remaining term on current mortgage: 15 years; new loan interest: 3.625%; new loan term: 15 years; cost of refinancing: $6,000. Assume that the opportunity cost is 10%. Should the borrower refinance
Suppose you want to purchase a property for $205,000 and you have $30,000 to put down as a down payment. The property has an existing mortgage that can be wrapped. This loan is a fixed-rate mortgage at 7 percent, monthly payments. This loan had an original balance of $150,000 and has 20 years remaining on its original 30-year term. The current market rate for a new fixed-rate loan is 10.50 percent for 20 years. The seller will give you a wrap loan for an amount equal to the purchase price minus the down payment at 8.75 percent, monthly payments. What is the effective equity yield for the wrap lender if the wrap loan is written for a term equal to the remaining term of the existing mortgage and both are held to maturity?
Suppose that a house was purchased with the buyer taking out a 20 year,$350,000 mortgage at 3% interest compounded monthly.(i) What will the monthly payments be?(ii) Find the total amount of interest paid when the loan is amortized over 20 years.
Suppose you invest $210,000 in an annuity that returns 6 annual payments, with the first payment one year from now and each subsequent payment growing by 5%. At an interest rate of 8%, how much is the first annual payment you receive? Equivalent problem structure (as a borrower): Suppose you borrow $210,000 to be paid back over 6 years with the first payment one year from now and each subsequent payment growing by 5%. At an interest rate of 8%, how much is the first annual payment? Please round your answer to the nearest hundredth.
Suppose you want to purchase a home for $525,000 with a 30-year mortgage at 4.84% interest. Suppose also that you can put down 30%. What are the monthly payments? (Round your answer to the nearest cent.) $ What is the total amount paid for principal and interest? (Round your answer to the nearest cent.) $ What is the amount saved if this home is financed for 15 years instead of for 30 years? (Round your answer to the nearest cent.)
With the following information, compute the net benefit of refinancing: Current loan balance: $200,000 Remaining term: 15 years Interest rate: 6.5% Old loan monthly payment: $1742.22 Expected number of future payments you will make: 72 Interest rate available on a new loan: 4.5% Cost of refinancing:5% of the outstanding balance. what is the resulting net benefit?
Assume you buy a house for $660,000 and have $132,000 as a down payment. Your mortgage rate is 3 percent APR compounded semi-annually and you amortize the mortgage over 25 years with monthly payments. You will assume that you could have earned 5 percent EAR on the down payment (opportunity cost), your marginal income tax rate is 40 percent, real estate fees are 4 percent +HST and property taxes will be $6,600 annually for this calculation. Ignore maintenance costs. a. What is the true return on your investment if you sell it in 6 years for $1,040,000? (Do not round your intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.) Return on Investment % b. What is an approximate annualized rate of return on your investment? (Do not round your intermediate calculations. Round your answer to 3 decimal places. Omit the "%" sign in your response.) Annualized Rate of Return %
A property has a FMV of $7,500,000. If the property owner can only secure a loan with an LTV of 70%, a loan amortization of 30 years, and an interest rate of 8.125%, then a) What is the monthly payment for this loan? and b) What is the outstanding balance on the loan after eight years?

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