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
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
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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Transcribed Image Text: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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