A borrower has been analyzing different adjustable rate mortgage (ARM) alternatives for the purchase of a property. The borrower anticipates owning the property for five years. The lender first offers a $157,000, 30-year fully amortizing ARM with the following terms: Initial interest rate - 6 percent Index 1-year Treasuries Payments reset each year Margin-2 percent Interest rate cap - None Payment cap = None Negative amortization - Not allowed Discount points=2 percent Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOM) 2-7 percent; (BOY) 3-8.5 percent; (BOY) 4-9.5 percent; (BOM) 5-11 percent. Required: a. Compute the payments and loan balances for the unrestricted ARM for the five-year period. b. Compute the yield for the unrestricted ARM for the five-year period. Complete this question by entering your answers in the tabs below. Required A Required B Compute the yield for the unrestricted ARM for the five-year period. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places, Yield < Required A Beques B

A borrower has been analyzing different adjustable rate mortgage (ARM) alternatives for the purchase of a property. The borrower anticipates owning the property for five years. The lender first offers a $157,000, 30-year fully amortizing ARM with the following terms: Initial interest rate - 6 percent Index 1-year Treasuries Payments reset each year Margin-2 percent Interest rate cap - None Payment cap = None Negative amortization - Not allowed Discount points=2 percent Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOM) 2-7 percent; (BOY) 3-8.5 percent; (BOY) 4-9.5 percent; (BOM) 5-11 percent. Required: a. Compute the payments and loan balances for the unrestricted ARM for the five-year period. b. Compute the yield for the unrestricted ARM for the five-year period. Complete this question by entering your answers in the tabs below. Required A Required B Compute the yield for the unrestricted ARM for the five-year period. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places, Yield < Required A Beques B

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 the following options for a $153,000 mortgage. Calculate the monthly payment and total closing costs for each option. Which option would Clearly explain why you chose the option that you chose. you choose? Option 1: a 30-year fixed-rate loan at 4.3% with $1500 closing cost and no points • Option 2: a 30-year fixed-rate loan at 3.8% with $1200 closing cost and 2 points
Use PMT formula on the image uploaded to determine the regular payment amount, rounded to the nearest cent. The cost of a home is financed with a $150,000 20-year fixed-rate mortgage at 3.5%. a. Find the monthly payments and the total interest for the loan. b. Prepare a loan amortization schedule for the first three months of the mortgage. ______________________________________________________________ a. The monthly payment is $________.. (Do not round until the final answer. Then round to the nearest cent as needed.) - The total interest for the loan is $_______. (Use the answer from part a to find this answer. Round to the nearest cent as needed.) b. Fill out the loan amortization schedule for the first three months of the mortgage below. Payment Number Interest Principal Loan Balance 1 $ $ $ 2 $ $ $ 3 $ $ $ (Use the answer from part a to find these answers. Round to the…
Give typing answer with explanation and conclusion
setting the appropriate values for a $100,000, 30-year mortgage at 6% interest and using Excel's autofill (drag) feature to fill in the cells to the end of the mortgage period. Use this to answer the following: How much of the first payment goes towards the principal? Interest?
Assume that a lender offers a 30-year, $153,000 adjustable rate mortgage (ARM) with the following terms: Initial interest rate = 7.5 percent Index = one-year Treasuries Payments reset each year Margin = 2 percent Interest rate cap = 1 percent annually; 3 percent lifetime Discount points = 2 percent Fully amortizing; however, negative amortization allowed if interest rate caps reached Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOY) 2 = 7 percent; (BOY) 3 = 8.5 percent; (BOY) 4 = 9.5 percent; (BOY) 5 = 11 percent. Required: a. Compute the payments and loan balances for the ARM for the five-year period. b. Compute the yield for the ARM for the five-year period. Complete this question by entering your answers in the tabs below. Required A Required B Compute the payments and loan balances for the ARM for the five-year period. (Do not round intermediate calculations. Round "Payments" to 2 decimal places and "Loan Balance"…
A borrower can obtain an 80 percent loan with an 9 percent interest rate and monthly payments. The loan is to be fully amortized over 25 years. Alternatively, he could obtain a 95 percent loan at an 9.5 percent rate with the same loan term. The borrower plans to own the property for the entire loan term. Required: a. What is the incremental cost of borrowing the additional funds? (Hint: The dollar amount of the loan does not affect the answer.) b. What is the incremental cost of borrowing the additional funds if 2 points were charged on the 95 percent loan? c. What is the incremental cost of borrowing the additional funds if the borrower planned to own the property for only five years? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the incremental cost of borrowing the additional funds if the borrower planned to own the years? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Incremental…
Your bank offers the following options on a $100,000 mortgage: i) A 15-year, 4% loan with no points ii) A 15-year, 3.5% loan, with 1.5 discount points If you plan to repay the loan in five years, what is the present value of the savings from having a lower outstanding balance at the end of the 5 years if you choose the option with points? (Use the 3.5% interest rate to discount the savings). [Hint: you first need to compute the outstanding balance at the end of year 5 for each option] $765.87 None of the above. $643.08 $1,000 please typing format
Give typing answer with explanation and conclusion Assume you want to borrow $300,000 and have been presented with two options. The first option is a fully amortizing loan with an interest rate of 3% and $4000 of origination fees and points. The second option is an interest only loan with an interest rate of 4% and $5000 of origination fees and points. Both loans are for 30 years and have monthly payments. Further assume that if the borrower chooses the interest only loan, any money saved on the monthly payment can be invested with a projected return of 7%. Also assume that the proceeds from the investment will first be used to pay off any remaining balance on the loan. How much money will the investor have left at the end of 30 years after repaying the loan? Group of answer choices None, the investor will owe $12,373.42 $323,060.72 $22,063.08 $30,750.78
Problem: You are interested in a fixed-rate mortgage for $399,000 and need to choose the between options: a 15-year mortgage or a 30- year mortgage. The current mortgage rate is 3.75% for the 15-year mortgage, and 3.25% for the 30-year mortgage. Both require a 15% down payment. (Hint: make use of the amortization formula from Chapter 12). (a) What are the monthly principal and interest payments for EACH loan? Show your work. (b) What is the total amount of interest paid on EACH loan? Show your work. (c) Overall, how much more interest is paid by choosing the 30-year mortgage? Show your work.
You are choosing between two mortgage options for a $1,000,000 property. The first option is a 60% LTV mortgage at an interest rate of 7%. The payment on this mortgage is calculated as if it were a 30 year mortgage, but the mortgage balance is due in 10 years. This loan also charges a 1% origination fee. The second option consists of two loans combined together. The primary loan (first mortgage) is a 50% LTV loan at an interest rate of 6.5%. This loan is an Interest Only loan due in 10 years and the loan charges a 1% origination fee. The secondary loan for this option is a 10% LTV loan at an interest rate of 9%. This loan is fully amortizing and is also due in 10 years and charges a 2% origination fee. What is the combined payment of the two loans that together form the 2nd loan option? Multiple Choice O $3,975.094 $3,248.4852 $2,783.4973 $1,846.7921
(Loan amortization) To buy a new house, you must borrow $135,000. To do this, you take out a $135,000, 25-year, 9 percent mortgage. Your mortgage payments, which are made at the end of each year (one payment each year), include both principal and 9 percent interest on the declining balance. How large will your annual payments be? The amount of your annual payments will be $ (Round to the nearest cent.)
Your property has net operating income of 4,500,000. Assuming you value the property with a cap rate of 6.5%, what is the DSC ratio if the lender will lend up to 75% of value and the rate is 4.5% based on a monthly pay, 30 years, fully amortizing loan? Group of answer choices 1.43 1.35 1.51 1.27

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