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Aya and Sakura would like to buy a house and their dream home costs $500,000.  Their goal is then to save $50,000 for a down payment and then would take out a mortgage loan for the rest.  They plan to put their monthly saved amount in a conservative mutual fund that has a track record of a 4.25% rate of return, compounded quarterly.  To be sure they don’t go spending this money on other things, they are going to move it into their investment account at the beginning of each month.  Their hope is to be able to buy this home in 7 years.  Aya and Sakura have now saved up their down payment to buy a home, but they still need to borrow to cover the rest.  For the home they want this will require a mortgage of $450,000 to cover the remaining amount and they’re not sure whether they could afford the monthly loan payments.  The bank has offered them a mortgage interest rate of 5.15%, compounded semi-annually.   how much would they have to be able to afford to pay each month in order to pay off their mortgage in 25 years?  What is the total amount of interest that would be paid to the lender after 25 years of payments?

Aya and Sakura would like to buy a house and their dream home costs $500,000.  Their goal is then to save $50,000 for a down payment and then would take out a mortgage loan for the rest.  They plan to put their monthly saved amount in a conservative mutual fund that has a track record of a 4.25% rate of return, compounded quarterly.  To be sure they don’t go spending this money on other things, they are going to move it into their investment account at the beginning of each month.  Their hope is to be able to buy this home in 7 years.  Aya and Sakura have now saved up their down payment to buy a home, but they still need to borrow to cover the rest.  For the home they want this will require a mortgage of $450,000 to cover the remaining amount and they’re not sure whether they could afford the monthly loan payments.  The bank has offered them a mortgage interest rate of 5.15%, compounded semi-annually.   how much would they have to be able to afford to pay each month in order to pay off their mortgage in 25 years?  What is the total amount of interest that would be paid to the lender after 25 years of payments?

Essentials Of Investments
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
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Aya and Sakura would like to buy a house and their dream home costs $500,000.  Their goal is then to save $50,000 for a down payment and then would take out a mortgage loan for the rest.  They plan to put their monthly saved amount in a conservative mutual fund that has a track record of a 4.25% rate of return, compounded quarterly.  To be sure they don’t go spending this money on other things, they are going to move it into their investment account at the beginning of each month.  Their hope is to be able to buy this home in 7 years. 

Aya and Sakura have now saved up their down payment to buy a home, but they still need to borrow to cover the rest.  For the home they want this will require a mortgage of $450,000 to cover the remaining amount and they’re not sure whether they could afford the monthly loan payments.  The bank has offered them a mortgage interest rate of 5.15%, compounded semi-annually.

 

how much would they have to be able to afford to pay each month in order to pay off their mortgage in 25 years? 

What is the total amount of interest that would be paid to the lender after 25 years of payments?

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