A property is purchased for $81,000. The purchase is financed with a GPM carrying a 12 percent interest rate. A 7.6 percent rate of graduation will be applied to monthly payments beginning each year after the loan is originated for a period of five years. The initial loan amount is $72,900 for a term of 30 years. The homeowner expects to sell the property after seven years. Required: a. If the initial monthly payment is $576.91, what will the payments be at the beginning of years 2, 3, 4, and 5? b. What would the payment be if a CPM loan was available? c. Assume the loan is originated with two discount points. What is the effective yield on the GPM?
A property is purchased for $81,000. The purchase is financed with a GPM carrying a 12 percent interest rate. A 7.6 percent rate of graduation will be applied to monthly payments beginning each year after the loan is originated for a period of five years. The initial loan amount is $72,900 for a term of 30 years. The homeowner expects to sell the property after seven years. Required: a. If the initial monthly payment is $576.91, what will the payments be at the beginning of years 2, 3, 4, and 5? b. What would the payment be if a CPM loan was available? c. Assume the loan is originated with two discount points. What is the effective yield on the GPM?
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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A property is purchased for $81,000. The purchase is financed with a GPM carrying a 12 percent interest rate. A 7.6 percent rate of graduation will be applied to monthly payments beginning each year after the loan is originated for a period of five years. The initial loan amount is $72,900 for a term of 30 years. The homeowner expects to sell the property after seven years.
Required:
a. If the initial monthly payment is $576.91, what will the payments be at the beginning of years 2, 3, 4, and 5?
b. What would the payment be if a CPM loan was available?
c. Assume the loan is originated with two discount points. What is the effective yield on the GPM?
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