A borrower is making a choice between a mortgage with monthly payments or biweekly payments. The loan will be $224,000 at 6percent Interest for 20 years.Required:a. hat would be the maturity period if payments are bi-weekly? How much will the borrower pay in total under each payment option?Which choice would be less costly to the borrower? Hint: Assume 26 total bi-weekly payments per year for the maturity period.b. Assume that the bi-weekly loan was available for 5.75%. What would be the maturity period if payments are bi-weekly? How muchwill the borrower pay in total under each payment option? Which choice would be less costly for the borrower?

Step 1: Final answer: a. - Maturity period for bi-weekly payments: 20 years * 12 months/year * 2…

Answered: A borrower is making a choice between a…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 14P

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Suppose you take out a $117,000, 20-year mortgage loan to buy a condo. The interest rate on the loan is 5%. To keep things simple, we will assume you make payments on the loan annually at the end of each year. a. What is your annual payment on the loan? b. Construct a mortgage amortization. c. What fraction of your initial loan payment is interest? d. What fraction of your initial loan payment is amortization? e. What is the total of the loan amount paid off after 10 years (halfway through the life of the loan)? f. If the inflation rate is 3%, what is the real value of the first (year-end) payment? g. If the inflation rate is 3%, what is the real value of the last (year-end) payment? h. Now assume the inflation rate is 6% and the real interest rate on the loan is unchanged. What must be the new nominal interest rate? i-1. Recompute the amortization table. i-2. What is the real value of the first (year-end) payment in this high-inflation scenario? j. What is the real value of the last…
A borrower is making a choice between a mortgage with monthly payments or biweekly payments. The loan will be $200,000 at 6 percent interest for 20 years. a. How would you analyze these alternatives? b. What if the biweekly loan was available for 5.75 percent? How would your answer change? c. If you take the monthly payment and agree to pay ½ of it every two weeks, when would your loan reach maturity?. Please correct and with steps.
A borrower is making a choice between a mortgage with monthly payments or biweekly payments. The loan will be $200,000 at 6 percent interest for 20 years.a. How would you analyze these alternatives?b. What if the biweekly loan was available for 5.75 percent? How would your answer change?
Consider a GNMA mortgage pool with principal of $50 million. The maturity is 30 years with a monthly mortgage payment of 13 percent per annum. Assume no prepayments. a) What is the monthly mortgage payment (100 percent amortizing) on the pool of mortgages? b)If the GNMA insurance fee is 5 basis points and the servicing fee is 45 basis points, what is the yield on the GNMA pass‑through? c) What is the monthly payment on the GNMA in part (b)? d)Calculate the first monthly servicing fee paid to the originating FIs. e) Calculate the first monthly insurance fee paid to GNMA.
Consider a mortgage loan where the periodic payment is 1 and the per period mortgage interest is 5%. For simplicity, the maturity of the loan is infinite. That is, the borrower has to pay the loan perpetually. The per period market interest rate is 10%. Calculate the market value of the loan. (Note: When an investor buys the loan, she can receive the value of one starting from the next period.)
1. Suppose you are planning to avail of a housing loan. You are considering the options given below. Option A: The mortgage will be paid on a monthly basis for 15 years at an interest rate of 6%, compounded monthly. • Option B: The mortgage will be paid on a monthly basis for 30 years at interest rate of 4%, compounded monthly. If you plan to borrow Php 2,000,000, how much will be the monthly amortization and the total interest in each option?
Consider a GNMA mortgage pool with principal of $20 million. The maturity is 30 years with a monthly mortgage payment of 10 percent per year. Assume no prepayments. What is the monthly mortgage payment (100 percent amortizing) on the pool of mortgages? If the GNMA insurance fee is 6 basis points and the servicing fee is 44 basis points, what is the yield on the GNMA pass-through and the monthly payments?
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Please complete parts A through E. Attached is an example.
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