A basic ARM is made for $217,000 at an initial interest rate of 6 percent for 30 years with an annual reset date. The borrowerbelieves that the interest rate at the beginning of year (BOY) 2 will increase to 7 percent.Required:a. Assuming that a fully amortizing loan is made, what will the monthly payments be during year 1?b. Based on (a) what will the loan balance be at the end of year (EOY) 1?c. Given that the interest rate is expected to be 7 percent at the beginning of year 2, what will the monthly payments be duringyear 2?d. What will be the loan balance at the EOY 2?e. What would be the monthly payments in year 1 if they are to be interest only?

a. Monthly Payments During Year 1The formula to calculate the monthly mortgage payment for a fully…

Answered: A basic ARM is made for $217,000 at an…

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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Consider a home mortgage of $200,000 at a fixed APR of 3% for 25 years. a. Calculate the monthly payment. b. Determine the total amount paid over the term of the loan. c. Of the total amount paid, what percentage is paid toward the principal and what percentage is paid for interest. a. The monthly payment is $ (Do not round until the final answer. Then round to the nearest cent as needed.) b. The total amount paid over the term of the loan is $ (Round to the nearest cent as needed.) c. Of the total amount paid,% is paid toward is paid % toward (Round to one decimal place as needed.) the principal, the principal, and % is paid for interest. and
A floating rate mortgage loan is made for $100,000 for 30yrs at a start rate of 12% interest. The parties have agreed to an $800 payment monthly. What is the loan balance at end of year 1? What if the interest rate increases to 13% at the end of year 1? How much intrest will be accrued from negative amortization in year one if the payment remains at $800? Year 5?
A floating rate mortgage loan is made for $155,000 for a 30 -year perlod at an Initial rate of 12 percent interest. However, the borrower and lender have negotlated a monthly payment of $1,240. Required: a. What will be the loan balance at the end of year 1 ? b. If the interest rate increases to 13 percent at the end of year 2 , how much is the payment plus negative amortization in year 2 and year 5 if the payment remains at $1,240 ?
A floating rate mortgage loan is made for $180,000 for a 30-year period at an initial rate of 12 percent interest. However, the borrower and lender have negotiated a monthly payment of $1,440. Required: a. What will be the loan balance at the end of year 1? b. If the interest rate increases to 13 percent at the end of year 2, how much is the payment plus negative amortization in year 2 and year 5 if the payment remains at $1,440? Complete this question by entering your answers in the tabs below. Required A Required B If the interest rate increases to 13 percent at the end of year 2, how much is the payment plus negative amortization in year 2 and year 5 if the payment remains at $1,440? Note: Do not round intermediate calculations. Round your final answers to 2 decimal places. Loan balance in year 2 Interest accrued - Year 2 Interest accrued - Years 2 - Year 5
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You borrow $300,000 to buy a house; if the annual interest rate is 4% and the term of the loan is 20 years, what is the annual payment required to retire the mortgage loan? Complete the loan amortization schedule for the first payment: Payment Interest Portion Principal Portion Ending Balance #1
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Need Detailed answer with steps please 30. Considering the following information, what is the NPV if the borrower refinances the loan? Expected holding period: 3 years, Current loan balance: $100,000; Current loan interest: 7%; Current loan mortgage payment: $898.33; Remaining term on current mortgage: 15 years; New loan interest: 5.5%; New loan mortgage payment: $817.08; New loan term: 15 years; Cost of refinancing: $5,000. Assume that the opportunity cost is the interest rate on the new loan (5.5%). A. -$5,000.00 B. -$1,155.27 C. $3,844.73 D. $8,844.73
A $50,000 mortgage loan requires monthly payments of $520 for 20 years. What is the semiannually compounded nominal rate of interest on the loan?A. 11.3752%B. 11.6987%C. 11.1146%D. 0.9381%E. 11.2573%
A$66.000interest-only mortgage loan is made for 30 years at a nominal interest rate of 8 percent. Interest is to be accrued daily, but payments are to be made monthly. Assume 30 days each month. Required: a. What will the monthly payments be on such a loan? b. What will the loan balance be at the end of 30 years? c. What is the effective annual, rate on this loan?
(Q) A borrower takes out an interest - only loan at 7% for $1,000,000 with a 10-year term. What is the monthly payment on this loan? (State your answer as a positive number, rounded to two decimal places.)
You borrowed $200,000 from the Bank of Nova Scotia. The loan is to be repaid at the end of five (5) years. The bank is to receive 8% interest on the loan balance that is outstanding. i. Calculate the yearly payment on a $200 000 loan. ii. Prepare an amortization schedule for this loan. iii. What is the loan balance just after the end of year two (2)? iv. What is the total interest paid over the life of the loan? v. What is the effective rate of interest on the loan if interest is compounded quarterly?

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