Hello, Just checking to see if this answer is correct. Please see below: Problem 1: The following two figures illustrate historical home price trend and interest rate for the 30-years fixed rate mortgage in the United States. Based on the information, please answer the following questions if today were in 2013. Assuming that history will repeat itself, what do you think of the U.S. housing market for the next 10 years? How about mortgage rate for the next 10 years? Based on your prediction, answer the two questions below: a)If you have money, should you invest in the housing market? b)If your answer in a) is “Yes”, and one lender allows you to borrow money, should you borrow money to buy the property? Why?
Hello, Just checking to see if this answer is correct. Please see below: Problem 1: The following two figures illustrate historical home price trend and interest rate for the 30-years fixed rate mortgage in the United States. Based on the information, please answer the following questions if today were in 2013. Assuming that history will repeat itself, what do you think of the U.S. housing market for the next 10 years? How about mortgage rate for the next 10 years? Based on your prediction, answer the two questions below: a)If you have money, should you invest in the housing market? b)If your answer in a) is “Yes”, and one lender allows you to borrow money, should you borrow money to buy the property? Why?
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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Hello,
Just checking to see if this answer is correct. Please see below:
Problem 1: The following two figures illustrate historical home price trend and interest rate for the 30-years fixed rate mortgage in the United States. Based on the information, please answer the following questions if today were in 2013.
- Assuming that history will repeat itself, what do you think of the U.S. housing market for the next 10 years? How about mortgage rate for the next 10 years?
- Based on your prediction, answer the two questions below:
a)If you have money, should you invest in the housing market?
b)If your answer in a) is “Yes”, and one lender allows you to borrow money, should you borrow money to buy the property? Why?
Transcribed Image Text:THE HISTORICAL PERSPECTIVE: 37 years, 3 cycles
16%
12%
8%
(1976Q1-2013Q1)
4%
Nominal year-over-year growth rate
+12%
Real year-over-year growth rate
Real cumulative changes shown in boxes
0%
-4%
-12%
-8%
+13
-12%
Real Growth =HPI Growth - CPI Growth
Where:
-16%
-12%
HPI Growth = In(HPI(t)/HPI(t-4))
CPI Growth = In(CPI(t)/CPI(t-4))
1976Q1
1977Q1
1978Q1
1979Q1
1980Q1
+62%
1981Q1
1983Q1
1984Q1
1985Q1
1986Q1
1987Q1
1988Q1
-37%
1990Q1
1992Q1
1993Q1
1994Q1
1995Q1
1996Q1
1997Q1
1998Q1
1999Q1
2000Q1
2001Q1
2002Q1
2004Q1
2005Q1
2006Q1
2007Q1
2003Q1
2008Q1
2009Q1
2010Q1
2011Q1
2012Q1
2013Q1
1982Q1
1989Q1
1991Q1
Transcribed Image Text:30-year Fixed Morgate Rate: 1971-2013
18%
16%
14%
12%
Historical average: 8.6%
10%
8%
6%
4%
2%
0%
2013Q3
2012Q3
2011Q3
2010Q3
2009Q3
2008Q3
2007Q3
2006Q3
2005Q3
2004Q3
2003Q3
2002Q3
2001Q3
2000Q3
1999Q3
1998Q3
1997Q3
1996Q3
1995Q3
1994Q3
1993Q3
1992Q3
1991Q3
1990Q3
1989Q3
1988Q3
1987Q3
1986Q3
1985Q3
1984Q3
1983Q3
1982Q3
1981Q3
1980Q3
1979Q3
1978Q3
1977Q3
1976Q3
1975Q3
1974Q3
1973Q3
1972Q3
1971Q3
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