A husband and wife buy a new home and take out a $100000 mortgage loan with level annual payments at the end of each year for 15 years on which the effective rate of interest is equal to 5.5%. At the end of 5 years they decide to make a maj se and want to borrow an additional $70000 to finance the new construction. They also wish to lengthen the overall length of the loan by 8 years (.e. until 23 years after the date of the original loan). In the negotiations the lender agrees to these only if the effective interest rate for the remainder of the loan after the first 5 years is raised to 6.5%. Find the revised annual payment which would result for the remainder of the loan.

A husband and wife buy a new home and take out a $100000 mortgage loan with level annual payments at the end of each year for 15 years on which the effective rate of interest is equal to 5.5%. At the end of 5 years they decide to make a maj se and want to borrow an additional $70000 to finance the new construction. They also wish to lengthen the overall length of the loan by 8 years (.e. until 23 years after the date of the original loan). In the negotiations the lender agrees to these only if the effective interest rate for the remainder of the loan after the first 5 years is raised to 6.5%. Find the revised annual payment which would result for the remainder of the loan.

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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The McBertys have "$20, 000" in savings to use as a down payment on a new home. They also have determined that they can afford between "$1, 600 and $1,900" per month for mortgage payments. If the mortgage rates are 11% per year compounded monthly, what is the price range for houses they should consider for a 30 - year loan?
A family currently live in an apartment whose monthly rent is $950. They are thinking of buying a house which would cost $220,000. They plan to live in this house for 5 years and sell it at the end of the 5th year. They would put a downpayment of $20,000 and finance the balance through a mortgage at 3.5% interest rate. The mortgage is to be repaid in 5 annual installments (which include both principal and interest) at the end of each year for the next 5 years The house will have the following additional expenses: annual maintenance: $1500, Property taxes:$5500, Insurance: $1200 Assume they are in tax bracket of 20% and the price of home, rent and expenditure increases by 2.5% per year. Their opportunity cost ar required rate of return is 5% per year. Note that property taxes are tax deductible and there no tax payable on capital gains. Use annual compounding for amortization schedule of mortgage. Calculate the rent saved during year 2. $12,583 $11,685 $11,977 $12,276
A family currently live in an apartment whose monthly rent is $950. They are thinking of buying a house which would cost $220,000. They plan to live in this house for 5 years and sell it at the end of the 5th year. They would put a downpayment of $20,000 and finance the balance through a mortgage at 3.5% interest rate. The mortgage is to be repaid in 5 annual installments (which include both principal and interest) at the end of each year for the next 5 years The house will have the following additional expenses: annual maintenance: $1500; Property taxes:$5500; Insurance: $1200. Assume they are in tax bracket of 20% and the price of home, rent and expenditure increases by 2.5% per year. Their opportunity cost or required rate of return is 5% per year. Note that property taxes are tax deductible and there no tax payable on capital gains. Use annual compounding for amortization schedule of mortgage. Calculate Ownership Operating Advantage in year 1. ($39,596) ($39,924) ($39,350)…
You decide to purchase a 2-bedroom, 1.5-bathroom single family property with a fully.amortizing $285,000 loan at 5.625 percent interest for 20 years. You are considering.monthly versus bi-weekly payments. What is the difference in the loan balance at the end of the 5th year if he decides tomake biweekly payments rather than monthly payments?
A couple takes a second mortgage of $100,000 and promises to pay it back with accured interest 15 years from now. They are given the interest option of simple interest at 4.5% per annum. Is this a good option? Give the answer supported by calculations.
A family currently live in an apartment whose monthly rent is $950. They are thinking of buying a house which would cost $220,000. They plan to live in this house for 5 years and sell it at the end of the 5th year. They would put a downpayment of $20,000 and finance the balance through a mortgage at 3.5% interest rate. The mortgage is to be repaid in 5 annual installments (which include both principal and interest) at the end of each year for the next 5 years The house will have the following additional expenses: annual maintenance: $1500, Property taxes $5500, Insurance: $1200. Assume they are in tax bracket of 20% and the price of home, rent and expenditure increases by 2.5% per year. Their opportunity cost or required rate of return is 5% per year. Note that property taxes are tax deductible and there no tax payable on capital gains. Use annual compounding for amortization schedule of mortgage. Calculate Ownership Operating Advantage in year 4. O($40,230) (340,155) Ⓒ($39,350)…
A couple has made monthly payments (of equal size, rounded to the nearest cent) over the past 10 years on a 15-year mortgage of $64,000 with Bank of America. The stated annual rate on the mortgage is 5%, compounded semi-annually. They are going to renegotiate their mortgage so that they can pay off their loan over the next 10 years at a higher rate of 7% per year compounded semi-annually. The first payment at the new rate will be made at the end of the current month following the renegotiation. What will be the size of their new payment?

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