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. Required: a. What would be the maturity period if payments are bi-weekly? How much will the borrower pay in total under each payment options Which choice would be less costly to the borrower? b. Assume that the bi-weekly loan was available for 575% What 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? Complete this question by entering your answers in the tabs below. Required B What 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? (Do not round intermediate calculations. Round your final answers to 2 decimal places.) Required A

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. Required: a. What would be the maturity period if payments are bi-weekly? How much will the borrower pay in total under each payment options Which choice would be less costly to the borrower? b. Assume that the bi-weekly loan was available for 575% What 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? Complete this question by entering your answers in the tabs below. Required B What 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? (Do not round intermediate calculations. Round your final answers to 2 decimal places.) Required A

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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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.
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