Assume a homeowner currently has 95% of its original mortgage balance outstanding? If he made no prepayments, the mortgage balance would decline to 94% of the original mortgage balance outstanding next month. However, the homeowner wins the lottery and decides to prepay a portion of their mortgage (curtail). If he prepays 20% of the currently outstanding mortgage, what is the single monthly mortality (SMM) on the mortgage?

Assume a homeowner currently has 95% of its original mortgage balance outstanding? If he made no prepayments, the mortgage balance would decline to 94% of the original mortgage balance outstanding next month. However, the homeowner wins the lottery and decides to prepay a portion of their mortgage (curtail). If he prepays 20% of the currently outstanding mortgage, what is the single monthly mortality (SMM) on the mortgage?

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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Justin and Hayley are interested in a fixed-rate mortgage for $450,000. They are undecided whether to choose a 15- or 30-year mortgage. The current mortgage rate is 3.5% for the 15-year mortgage, and 3.85% for the 30-year mortgage (a) What are the monthly principal and interest payments for EACH loan? (b) What is the total amount of interest paid on EACH loan? (c) Overall, how much more interest is paid by choosing the 30-year mortgage?
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