a. Assume that the buyer is expected to benefit from the interest savings on the assumable loan for the entire loan term. What is the cash equivalent value of the property? b. What is the cash equivalent value of the property if you assumed that the buyer is only expected to benefit from interest savings for five years because he would probably sell or refinance after five years?

a. Assume that the buyer is expected to benefit from the interest savings on the assumable loan for the entire loan term. What is the cash equivalent value of the property? b. What is the cash equivalent value of the property if you assumed that the buyer is only expected to benefit from interest savings for five years because he would probably sell or refinance after five years?

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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Concept explainers

Mortgages

A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.

Mortgage

The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.

Question

An appraiser is looking for comparable sales and finds a property that recently sold for $228,500. She finds
that the buyer was able to assume the seller's fully amortizing mortgage, which had monthly payments based
on a 7 percent interest. The balance of the loan at the time of sale was $149,500 with a remaining term of 15
years (monthly payments). The appraiser determines that if a $149,500 loan was obtained on the same
property, monthly payments at the market rate for a 15-year fully amortizing loan would have been 8 percent
with no points.
Required:
a. Assume that the buyer is expected to benefit from the interest savings on the assumable loan for the entire
loan term. What is the cash equivalent value of the property?
b. What is the cash equivalent value of the property if you assumed that the buyer is only expected to benefit
from interest savings for five years because he would probably sell or refinance after five years?
Complete this question by entering your answers in the tabs below.
Required A Required B
Assume that the buyer is expected to benefit from the interest savings on the assumable loan for the entire loan ter
is the cash equivalent value of the property? (Do not round intermediate calculations. Round your final answer to 2 c
places.)
Cash equivalent value
< Required A
Required B
>

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An appraiser is looking for comparable sales and finds a property that recently sold for $216,500. She finds that the buyer was able to assume the seller’s fully amortizing mortgage, which had monthly payments based on a 7 percent interest. The balance of the loan at the time of sale was $145,500 with a remaining term of 15 years (monthly payments). The appraiser determines that if a $145,500 loan was obtained on the same property, monthly payments at the market rate for a 15-year fully amortizing loan would have been 8 percent with no points. 1. Assume that the buyer is expected to benefit from the interest savings on the assumable loan for the entire loan term. What is the cash equivalent value of the property? 2. What is the cash equivalent value of the property if you assumed that the buyer is only expected to benefit from interest savings for five years because he would probably sell or refinance after five years?
An appraiser is looking for comparable sales and finds a property that recently sold for $204,500. She finds that the buyer was able to assume the seller's fully amortizing mortgage, which had monthly payments based on a 7 percent interest. The balance of the loan at the time of sale was $141,500 with a remaining term of 15 years (monthly payments). The appraiser determines that if a $141,500 loan was obtained on the same property, monthly payments at the market rate for a 15-year fully amortizing loan would have been 8 percent with no points. Required: a. Assume that the buyer is expected to benefit from the interest savings on the assumable loan for the entire loan term. What is the cash equivalent value of the property? b. What is the cash equivalent value of the property if you assumed that the buyer is only expected to benefit from interest savings for five years because he would probably sell or refinance after five years? Complete this question by entering your answers in the…
An appraiser is looking for comparable sales and finds a property that recently sold for $224, 000. She finds that the buyer was able to assume the seller's fully amortizing mortgage, which had monthly payments based on a 7 percent interest. The balance of the loan at the time of sale was $148, 000 with a remaining term of 15 years (monthly payments). The appraiser determines that if a $148, 000 loan was obtained on the same property, monthly payments at the market rate for a 15-year fully amortizing loan would have been 8 percent with no points. Required: a. Assume that the buyer is expected to benefit from the interest savings on the assumable loan for the entire loan term. What is the cash equivalent value of the property? b. What is the cash equivalent value of the property if you assumed that the buyer is only expected to benefit from interest savings for five years because he would probably sell or refinance after five years? Use excel spreadsheet to show work and provideanswer.
An appraiser is looking for comparable sales and finds a property that recently sold for $200,000. She finds that the buyer was able to assume the seller’s fully amortizing mortgage which had monthly payments based on a 7 percent interest rate. The balance of the loan at the time of sale was $140,000 with a remaining term of 15 years (monthly payments). Theappraiser determines that if a $140,000 loan was obtained on the same property, monthly payments at the market rate for a 15-year fully amortizing loan would have been 8 percent with no points.a. Assume that the buyer expected to benefit from the interest savings on the assumable loan for the entire loan term. What is the cash equivalent value of the property?b. How would your answer to part (a) change if you assumed that the buyer only expected to benefit from interest savings for five years because he would probably sell or refinance after five years?
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