Five years ago, Bob purchased an apartment in Tai Po of $2,000,000. He made a down payment of 30% and financed the balance with a 20 years' conventional mortgage to be amortized through monthly payments. The term is adjustable-rate mortgage (ARM) with interest of 8% per year compounded monthly. Currently, the interest rate for his ARM is 5% per year compounded monthly. Bob is thinking of refinancing his property by paying an extra amount of $500,000 now and to amortize the rest of the loan in the next 8 years. (a) What was Bob's monthly mortgage payment for his first 5 years? (interest is 8%) (b) What is Bob's outstanding principal now if he does not refinance his apartment? (interest is 8%) (c) What is Bob's outstanding principal now if he refinances his apartment by paying the extra payment? (d) What will Bob's new monthly mortgage payment be (after the reset) if he refinances his apartment? (interest is 5%)

Five years ago, Bob purchased an apartment in Tai Po of $2,000,000. He made a down payment of 30% and financed the balance with a 20 years' conventional mortgage to be amortized through monthly payments. The term is adjustable-rate mortgage (ARM) with interest of 8% per year compounded monthly. Currently, the interest rate for his ARM is 5% per year compounded monthly. Bob is thinking of refinancing his property by paying an extra amount of $500,000 now and to amortize the rest of the loan in the next 8 years. (a) What was Bob's monthly mortgage payment for his first 5 years? (interest is 8%) (b) What is Bob's outstanding principal now if he does not refinance his apartment? (interest is 8%) (c) What is Bob's outstanding principal now if he refinances his apartment by paying the extra payment? (d) What will Bob's new monthly mortgage payment be (after the reset) if he refinances his apartment? (interest is 5%)

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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