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
Related questions
Question
Using the table please show step by step how to solve a and b using excel.
Bob decides to buy a house with price of $750,000. He puts 20% down payment and considers a 15-year fixed rate mortgage to pay the remaining balance. The lender offers Bob three choices of the mortgage with monthly payments. Suppose that the origination cost is $5,500.
a. If the loan will be outstanding for 15 years, what is the effective cost for each choice? Which choice should Bob make and why?
b. Which mortgage choices (i.e., b and c) are not properly priced and Why?
Transcribed Image Text:Choice Mortgage rate
Points
a
6.500%
0.00
b
6.125%
1.00
с
6.000%
3.50
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