Capital structure Kirsten Neal is interested in purchasing a new house given that mortgage rates are low. Her bank has specific rules regarding an applicant's ability to meet the contractual payments associated with the requested debt. Kirsten must submit personal financial data for her income, expenses, and existing installment loan payments. The bank then calculates and compares certain ratios to predetermined allowable values to determine if it will make the requested loan. The requirements are as follows: (1) Monthly mortgage payments <29% of monthly gross (before-tax) income. (2) Total monthly installment payments (including the mortgage payments) <38% of monthly gross (before-tax) income. Kirsten submits the following personal financial data: Monthly gross (before-tax) income Monthly installment loan obligations Requested mortgage Monthly mortgage payment a. Calculate the ratio for requirement 1. $4,450 375 145,000 1,120 a. The ratio for requirement 1 is %. (Round to two decimal places.) C
Capital structure Kirsten Neal is interested in purchasing a new house given that mortgage rates are low. Her bank has specific rules regarding an applicant's ability to meet the contractual payments associated with the requested debt. Kirsten must submit personal financial data for her income, expenses, and existing installment loan payments. The bank then calculates and compares certain ratios to predetermined allowable values to determine if it will make the requested loan. The requirements are as follows: (1) Monthly mortgage payments <29% of monthly gross (before-tax) income. (2) Total monthly installment payments (including the mortgage payments) <38% of monthly gross (before-tax) income. Kirsten submits the following personal financial data: Monthly gross (before-tax) income Monthly installment loan obligations Requested mortgage Monthly mortgage payment a. Calculate the ratio for requirement 1. $4,450 375 145,000 1,120 a. The ratio for requirement 1 is %. (Round to two decimal places.) C
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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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
Transcribed Image Text:Capital structure Kirsten Neal is interested in purchasing a new house given that mortgage rates are low. Her bank has specific rules regarding an applicant's
ability to meet the contractual payments associated with the requested debt. Kirsten must submit personal financial data for her income, expenses, and existing
installment loan payments. The bank then calculates and compares certain ratios to predetermined allowable values to determine if it will make the requested loan.
The requirements are as follows:
(1) Monthly mortgage payments <29% of monthly gross (before-tax) income.
(2) Total monthly installment payments (including the mortgage payments) <38% of monthly gross (before-tax) income.
Kirsten submits the following personal financial data:
Monthly gross (before-tax) income
Monthly installment loan obligations
Requested mortgage
Monthly mortgage payment
a. Calculate the ratio for requirement 1.
$4,450
375
145,000
1,120
a. The ratio for requirement 1 is%. (Round to two decimal places.)
Transcribed Image Text:installment loan payments. Ine bank then calculates and compares certain ratios to predetermined allowable values to determine it it will make the requested loan.
The requirements are as follows:
(1) Monthly mortgage payments <29% of monthly gross (before-tax) income.
(2) Total monthly installment payments (including the mortgage payments) <38% of monthly gross (before-tax) income.
Kirsten submits the following personal financial data:
Monthly gross (before-tax) income
Monthly installment loan obligations
Requested mortgage
Monthly mortgage payment
$4,450
375
145,000
1,120
a. Calculate the ratio for requirement 1.
b. Calculate the ratio for requirement 2.
c. Assuming that Kirsten has adequate funds for the down payment and meets other lender requirements, will Kirsten be granted the loan?
a. The ratio for requirement 1 is %. (Round to two decimal places.)
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