You are choosing between two mortgage options for a $1,000,000 property. The first option is a 60% LTV mortgage at an interestrate of 7%. The payment on this mortgage is calculated as if it were a 30 year mortgage, but the mortgage balance is due in 10years. This loan also charges a 1% origination fee. The second option consists of two loans combined together. The primary loan(first mortgage) is a 50% LTV loan at an interest rate of 6.5%. This loan is an Interest Only loan due in 10 years and the loan chargesa 1% origination fee. The secondary loan for this option is a 10% LTV loan at an interest rate of 9%. This loan is fully amortizing andis also due in 10 years and charges a 2% origination fee. What is the combined payment of the two loans that together form the2nd loan option?Multiple ChoiceO $3,975.094$3,248.4852$2,783.4973$1,846.7921

The second option consists of 2 loans. The first loan is an interest only loan. The monthly payment…

Answered: is also due in 10 years and charges a…

is also due in 10 years and charges a 2% origination fee. What is the combined payment of the two loans that together form the 2nd loan option?

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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Concept explainers

Amortized Loans

The term "amortization" refers to spreading the value of a loan or a debt over a series of regular payments or installments comprising of both the principal and interest amount. It generally involves the process where in the value of a loan or an intangible asset is written down over its maturity period.

Question

You are choosing between two mortgage options for a $1,000,000 property. The first option is a 60% LTV mortgage at an interest
rate of 7%. The payment on this mortgage is calculated as if it were a 30 year mortgage, but the mortgage balance is due in 10
years. This loan also charges a 1% origination fee. The second option consists of two loans combined together. The primary loan
(first mortgage) is a 50% LTV loan at an interest rate of 6.5%. This loan is an Interest Only loan due in 10 years and the loan charges
a 1% origination fee. The secondary loan for this option is a 10% LTV loan at an interest rate of 9%. This loan is fully amortizing and
is also due in 10 years and charges a 2% origination fee. What is the combined payment of the two loans that together form the
2nd loan option?
Multiple Choice
O $3,975.094
$3,248.4852
$2,783.4973
$1,846.7921

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Consider a loan of $7700 at 6.8% compounded semiannually, with 18 semiannual payments. Find the following. (a) the payment necessary to amortize the loan (b) the total payments and the total amount of interest paid based on the calculated semiannual payments (c) the total payments and total amount of interest paid based upon an amortization table. (a) The semiannual payment needed to amortize this loan is $ (Round to the nearest cent as needed.) (b) The total amount of the payments is $ (Round to the nearest cent as needed.) The total amount of interest paid is $. (Round to the nearest cent as needed.) (c) The total payment for this loan from the amortization table is $ (Round to the nearest cent as needed.) The total interest from the amortization table is $ (Round to the nearest cent as needed.)
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