An investor obtained a fully amortizing mortgage 5 years ago for $95,000 at 11% for 30 years. Mortgage rates have dropped, so that a similar 25-year loan can be obtained at 10%. There is no prepayment penalty on the original loan but 3 points and a $2,000 loan fee are charged on the new loan at origination.

An investor obtained a fully amortizing mortgage 5 years ago for $95,000 at 11% for 30 years. Mortgage rates have dropped, so that a similar 25-year loan can be obtained at 10%. There is no prepayment penalty on the original loan but 3 points and a $2,000 loan fee are charged on the new loan at origination.

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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Similar questions

A homebuyer bought a house for $250,000. The buyer paid 22 percent down. If the borrower took out a 30-year fixed-rate mortgage at a 7 percent annual interest rate, how much interest will the borrower pay over the life of the mortgage?
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 %
The Zusi's sign a $300,000.00 mortgage, 2-year term, monthly payments at 7% c.m., amortized over 30 years. Payments 19 and 20 are missed (due to loss of income from some lousy pandemic). Calculate the balance owing at the end of the term.
The Nicols are buying a house selling for $235,000. They pay a down payment of $35,000 from the sale of their current house. To obtain a 15-year mortgage at a 5% interest rate, the Nicols must pay 3.5 points at the time of closing. a) What is the amount of the mortgage? b) What is the cost of the 3.5 points?
Island News purchased a piece of property for $1.82 million. The firm paid a down payment of 20 percent in cash and financed the balance. The loan terms require monthly payments for 20 years at an APR of 4.00 percent, compounded monthly. What is the amount of each mortgage payment?
Island News purchased a piece of property for $1.46 million. The firm paid a down payment of 20 percent in cash and financed the balance. The loan terms require monthly payments for 20 years at an APR of 4.33 percent, compounded monthly. What is the amount of each mortgage payment? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Note: You may use Excel or Google Sheets to solve this problem (highly recommended).
Barrett Greenhouses obtained a $647,000 mortgage amortized over 20 years at 6% compounded semiannually for a 5-year term. The mortgage is now at the end of the initial 5-year term, and will be renewed at 7.5% compounded semiannually for the next 5-year term. How much will the monthly mortgage payments increase upon renewal as a result of the higher interest rate if the original amortization period is retained?
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 %
After two years in business, the owners have saved (have a surplus of) $123,750.00. They must decide if they will invest in property or investment bonds. If they invest in a property and a vehicle, the total cost will be $445,500,00, of which $123,750.00 will be required as a down payment. The fixed interest rate on the mortgaged amount is 5.40% compounded semi-annually for a term of 13 years. 5. What is the size of the semi-annual payments required to settle this mortgage? 6. What is the size of the final payment? 7. How long would it take (in months) to settle this loan with regular monthly payments of exactly $2000 instead of the PMT value calculated in Part 5?
An interest-only mortgage is made for $94,000 at 6 percent interest for 10 years. The lender and borrower agree that monthly payments will be constant and will require no loan amortization. Required: a. What will the monthly payments be? b. What will be the loan balance after five years? c. If the loan is repaid after five years, what will be the yield to the lender? d. Instead of being repaid after five years, what will be the yield if the loan is repaid after 10 years?
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 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

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