Please show step by step and formulas to solve and answer A. and B. You borrow a Graduated Payment Mortgage (GPM) of $400,000 with monthly payments and 15-year term. The annual interest rate is 4%. The lender allows you to pay only 0.5 monthly PMT for the first 5 years and pay full monthly PMT thereafter. In other words, your payment factors are as follows: month 1-month 60: 50%; and month 61- month 180: 100%. Suppose that the origination cost of the loan is $5,000, please answer the following questions: A. What is your monthly payment for the first 5 years? B. What is your annual effective cost of the GPM if you hold the loan for an entire term?
Please show step by step and formulas to solve and answer A. and B. You borrow a Graduated Payment Mortgage (GPM) of $400,000 with monthly payments and 15-year term. The annual interest rate is 4%. The lender allows you to pay only 0.5 monthly PMT for the first 5 years and pay full monthly PMT thereafter. In other words, your payment factors are as follows: month 1-month 60: 50%; and month 61- month 180: 100%. Suppose that the origination cost of the loan is $5,000, please answer the following questions: A. What is your monthly payment for the first 5 years? B. What is your annual effective cost of the GPM if you hold the loan for an entire term?
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 14P
Question
Please show step by step and formulas to solve and answer A. and B.
You borrow a Graduated Payment Mortgage (GPM) of $400,000 with monthly payments and 15-year term. The annual interest rate is 4%. The lender allows you to pay only 0.5 monthly PMT for the first 5 years and pay full monthly PMT thereafter. In other words, your payment factors are as follows: month 1-month 60: 50%; and month 61- month 180: 100%. Suppose that the origination cost of the loan is $5,000, please answer the following questions:
A. What is your monthly payment for the first 5 years?
B. What is your annual effective cost of the GPM if you hold the loan for an entire term?
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