QUESTION 2 You would like to purchase a home and are interested to find out how much you can borrow. When your lender calculates your debt to income ratio, he determines that your maximum monthly payment can be no more than $2,500. You would like to have a 30 year fully amortizing loan and the interest rate offered on such a loan is currently 6%. Given these constraints, what is the largest loan you can obtain?

QUESTION 2 You would like to purchase a home and are interested to find out how much you can borrow. When your lender calculates your debt to income ratio, he determines that your maximum monthly payment can be no more than $2,500. You would like to have a 30 year fully amortizing loan and the interest rate offered on such a loan is currently 6%. Given these constraints, what is the largest loan you can obtain?

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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The math: One point on a mortgage loan is 1% of the principal. (The principal is the amount to be financed.) Example: On a $380,000 mortgage, one point is . You are buying a house, taking out a 30-year mortgage. After making a down payment on this house, you still need to finance $205,000 plus $5000 closing costs. (This is called rolling the closing costs into the loan). So your mortgage will be $210,000 on a loan term of 30 years. Two loans are offered: Loan A: no points & an interest rate (APR) of 4.5% Loan B: 1 points & an interest (APR) rate of 4.2% As you can see, option B has a lower APR leading to lower payments, but an up-front cost. For both loans, the down payment has already been subtracted/applied. You do have the extra money saved up to pay the point if you choose Loan B, so the amount to be financed is THE SAME for Loan A and Loan B, $210,000 for loan A: Use the loan formula to calculate the monthly payment on the financed amount.…
Answer the following question using a spreadsheet and the material in the appendix. You would like to buy a house. Assume that given your income, you can afford to pay $12,000 a year to a lender for the next 30 years. If the interest rate is 7% how much can you borrow today based on your ability to pay? What about if the interest rate is 3%? Maximum mortgage at 7%: $ Maximum mortgage at 3%: $
Quantitative Problem: You need $18,000 to purchase a useel car. I Your wealthy uncle is willing to lend you the money as an amortized loan. He would like. would like you to make annual payments for 4 years with the first payment to be made one year from today. He requires on 8% anual return. a) What will be your amual loan payments? Do not round intermediate calculations. Round your answer to the nearest cent. b) How much of your payment will be first applied to interest and to principal repayment? Do not round intermediate calculations. Round to the nearest cent. your answers Interest Principal repayment m
What is amortization? Describe other types of loan arrangements. If you could afford to pay cash for a home, is it worth it to take a mortgage out anyway? If no, why not. If yes, why. Here are the variables:30 year amortized mortgage at 5% fixedInvestment opportunity at 3.5% fixedPrice of the home is $500,000. You’ll either invest $400,000 and make a down payment on the house of $100,000 and mortgage the rest. Hint: Find out if the interest earned on the investment is more or less than the interest made on the investment.
A borrower can obtain an 80 percent loan with an 9 percent interest rate and monthly payments. The loan is to be fully amortized over 25 years. Alternatively, he could obtain a 95 percent loan at an 9.5 percent rate with the same loan term. The borrower plans to own the property for the entire loan term. Required: a. What is the incremental cost of borrowing the additional funds? (Hint: The dollar amount of the loan does not affect the answer.) b. What is the incremental cost of borrowing the additional funds if 2 points were charged on the 95 percent loan? c. What is the incremental cost of borrowing the additional funds if the borrower planned to own the property for only five years? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the incremental cost of borrowing the additional funds if the borrower planned to own the years? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Incremental…
Give typing answer with explanation and conclusion Assume you want to borrow $300,000 and have been presented with two options. The first option is a fully amortizing loan with an interest rate of 3% and $4000 of origination fees and points. The second option is an interest only loan with an interest rate of 4% and $5000 of origination fees and points. Both loans are for 30 years and have monthly payments. Further assume that if the borrower chooses the interest only loan, any money saved on the monthly payment can be invested with a projected return of 7%. Also assume that the proceeds from the investment will first be used to pay off any remaining balance on the loan. How much money will the investor have left at the end of 30 years after repaying the loan? Group of answer choices None, the investor will owe $12,373.42 $323,060.72 $22,063.08 $30,750.78
Loan rates of interest Personal Finance Problem John Flemming has been shopping for a loan to finance the purchase of a used car. He has found three possibilities that seem attractive and wishes to select the one with the lowest interest rate. The information available with respect to each of the three $9,000 loans is shown in the following table, Each loan requires John to make one payment at the end of each year. a. Determine the interest rate associated with each of the loans. b. Which loan should John take? Data table (Click on the icon here into a spreadsheet.) in order to copy the contents of the data table below Loan Principal Annual payment Term (years) A $9,000 $3,492.43 B $9,000 $2,901.35 C $9,000 $2,136.75 5 345 Print Done O empts
You own a home that was recently appraised for $370,000. The balance on your existing mortgage is $129,350. If your bank is willing to loan up to 70% of the appraised value, what is the potential amount (in $) of credit available on a home equity loan? 2$
13) Some financial advisors recommend that your monthly mortgage payment be no higher than 28% of your monthly net income. What is 28% of your monthly net income, as determined in question twelve? This is the estimated amount you can afford per month for a mortgage. 4,518*0.28 $1,265 28% of my monthly net income is $1,265. 14) We can calculate how much of a house you can afford using the loan formula. In question thirteen, you determined the monthly mortgage payment you can afford. Using this value for the regular monthly payment, calculate the present value (P), assuming you receive a 30-year mortgage (loan) with an annual interest rate of 6.328% with monthly compounding. (Note: This rate is realistic for a mortgage initiated in January 2024.) I need to use Loan formula to find the present value (P). please help me
Loan A B с Principal $7,000 $7,000 $7,000 Annual payment $2,914.24 $2,256.61 $1,846.48 Term (years) 3 345 4
15. Mortgage payments Mortgages, loans taken to purchase a property, involve regular payments at fixed intervals and are treated as reverse annuities. Mortgages are the reverse of annuities, because you get a lump-sum amount as a loan in the beginning, and then you make monthly payments to the lender. You've decided to buy a house that is valued at $1 million. You have $300,000 to use as a down payment on the house, and want to take out a mortgage for the remainder of the purchase price. Your bank has approved your $700,000 mortgage, and is offering a standard 30-year mortgage at a 12% fixed nominal interest rate (called the loan's annual percentage rate or APR). Under this loan proposal, your mortgage payment will be per month. (Note: Round the final value of any interest rate in percentage form to four decimal places.) Your friends suggest that you take a 15-year mortgage, because a 30-year mortgage is too long and you will pay a lot of money on interest. If your bank approves a…
1) What is the loanable funds market? 2) Calculate the following: You save $100 and want to see how much you will earn based on the following interest rates Interest Rate Value after 1 month -1% ? 0.5% ? 1% ? 2% ? 3) What supply factors affect the Loanable Funds market? 4) What demand factors affect the Loanable Funds market?

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