ago a borrower took a mortgage for $150,000 at 6% for 30 years We call this 30-year mortgage as the old mortgage. Currently, the market interest rate is 5.25%. The borrower is considering refinancing to a new 23- year mortgage at the current interest rate. We call this 23-year mortgage as the new mortgage. The lender has a prepayment penalty of 3% of the outstanding loan balance and the closing cost of the new mortgage is 2% of the loan amount. Assume that the borrower intends to hold either mortgage until maturity. Should he refinance? Yes, total savings of $7,935 > total refinancing cost of $6,723

ago a borrower took a mortgage for $150,000 at 6% for 30 years We call this 30-year mortgage as the old mortgage. Currently, the market interest rate is 5.25%. The borrower is considering refinancing to a new 23- year mortgage at the current interest rate. We call this 23-year mortgage as the new mortgage. The lender has a prepayment penalty of 3% of the outstanding loan balance and the closing cost of the new mortgage is 2% of the loan amount. Assume that the borrower intends to hold either mortgage until maturity. Should he refinance? Yes, total savings of $7,935 > total refinancing cost of $6,723

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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1. A 30-year mortgage at 4.2 % interest compounded monthly with a monthly payment of $1095.24 has an unpaid balance of $10,000 after 350 months. Find the unpaid balance after 351 months. 2. A car manufacturer is offering the choice of a 0.6 % loan compounded monthly for 72 months or $800 cash back on the purchase of a $18,500 new car. If a car buyer takes the 0.5 % loan offer, how much will his monthly payment be? If the car buyer takes the $2400 cash-back offer and can borrow money from a local bank at 13 % interest compounded monthly for eight years, how much will the monthly payment be?
A homeowner took out a 25-year fixed-rate mortgage of $205,000. The mortgage was taken out 7 years ago at a rate of 7.05 percent. If the homeowner refinances, the charges will be $3,350. What is the highest interest rate at which it would be beneficial to refinance the mortgage? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. APR %
A mortgage for $200,000 with interest rate of 7.20%, fixed monthly payments, and term of 30 years was originated 10 years ago. If the loan's current balance is refinanced for the rest of the original term of at the rate of 6.30% with monthly payments, what is the implied annual savings rate given that the existing loan has a refinancing fee of 4% of the remaining balance at the time of refinancing and that loan is expected to be outstanding for 9 years? Selected Answer: Below 6% O A. Correct Answer: Е. Between 12% and 14%
Ma & Pa General Store is taking out a mortgage for a new building. It is going to be an interest-only, 15-year balloon mortgage for $350,000. The APR is 4.25%. The last payment will be the balloon payment of the full principal. What is their balloon mortgage payment?
A mortgage broker is offering a $279,000 30-year mortgage with a teaser rate. In the first two years of the mortgage, the borrower makes monthly payments on only a 4.5 percent APR interest rate. After the second year, the mortgage interest rate charged increases to 7.5 percent APR. What are the monthly payments in the first two years? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Monthly payment What are the monthly payments after the second year? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Monthly payment > 2 D TRENE VAR TVUNG S 2006- E - E
A homeowner took out a 15-year fixed-rate mortgage of $140,000. The mortgage was taken out 7 years ago at a rate of 7.4 percent. If the homeowner refinances, the charges will be $1,000. What is the highest interest rate at which it would be beneficial to refinance the mortgage? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. APR %
Four years ago, you took out a $375,000, 25-year mortgage with an interest rate of 5% and a 3% prepayment fee applicable for the first five years. If you decide to pay off this mortgage now, what will the balance due be?
David obtained a fully amortizing loan 8 years ago for $12,0000 at 8% for 30 years. Mortgage rates have dropped in such a manner so as to provide a loan for 22 years at 6.5%. There is no prepayment penalty on the mortgage balance of the original loan, but 2 points will be charged on the new loan and other closing cost will be $3000. All payments are monthly. How much does David need to borrow if he decides to borrow only outstanding loan balance? Is refinancing a good option if David decides to repay the full amount of loan in 5 more years? How would your answer for part 2a change if David decides to borrow outstanding loan balance and other refinancing costs? Would your answer for part 2b change if David decides to keep the loan for full term of the loan?
A mortgage broker is offering a $279,000 30-year mortgage with a teaser rate. In the first two years of the mortgage, the borrower makes monthly payments on only a 4.5 percent APR interest rate. After the second year, the mortgage interest rate charged increases to 7.5 percent APR. What are the monthly payments in the first two years? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Monthly payment What are the monthly payments after the second year? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Monthly payment
A homeowner took out a 20-year fixed-rate mortgage of $175,000. The mortgage was taken out 6 years ago at a rate of 6.75 percent. If the homeowner refinances, the charges will be $3,050. What is the highest interest rate at which it would be beneficial to refinance the mortgage? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Answer is complete but not entirely correct. APR 6.00
Mr. Tramp made a mortgage 5 years ago for $85, 000 at 8.25% interest and a 15 year term. Rates have now risen to 10% for an equivalent loan. Mr. Tramps lender is willing to discount the loan by $2, 000 if he will prepay the loan. What rate of return would Mr. Tramp receive by prepaying the loan?(A)7.83% (B) 10.24% (C) 14.32% (D) 9.14%
4

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