Question 5: A bank offers two types of mortgage plans for a loan value of $800,000 with a down payment of 10%: Plan 1: A 40-year mortgage plan with 8% interest rate payable monthly Plan 2: A 20-year mortgage plan with 8% interest rate payable monthly a. Compute the monthly payment for each loan. b. Compute the total payment made for each loan. c. Compute the total interest paid for each loan. d. Based on the calculations, which plan should be chosen and why? What is the difference of total interest paid among the two loans?

Question 5: A bank offers two types of mortgage plans for a loan value of $800,000 with a down payment of 10%: Plan 1: A 40-year mortgage plan with 8% interest rate payable monthly Plan 2: A 20-year mortgage plan with 8% interest rate payable monthly a. Compute the monthly payment for each loan. b. Compute the total payment made for each loan. c. Compute the total interest paid for each loan. d. Based on the calculations, which plan should be chosen and why? What is the difference of total interest paid among the two loans?

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter7: Using Consumer Loans

Section: Chapter Questions

Problem 7FPE: Calculating interest and APR of installment loan. Assuming that interest is the only finance charge,...

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1. A loan with the following terms is being made: Fixed rate, constant payment 9% interest rate $70,000 desired mortgage amount. $1,500 loan discount points paid by the buyer/borrower to the lender 25-year term, monthly payments a. Calculate the APR for federal truth-in-lending purposes (assume that the discount points are paid up front by the borrow and rolled into the loan principal). b. Do you think that the APR calculated in (a) reflects the likely return that the lender will receive over the term of the loan? List specific reasons that the lender's actual return might be different than the APR.
Assume a borrower is given the following options for payment of a $100,000 loan: 5-year amortizing loan paying annual interest rates of 8%5-year non-amortizing loan with principal payment at maturity paying annual rates of 8% 5-year amortizing loan with interest payments only of 8% for years 1-3 and principal of $50,000 for years 4-5. Show the payments for all three loans, including interest and principal payments, and balances every year.
effective rates of interest find the interest rate earned on each of the following : a. You borrow $700and promise to pay back $749 at the end of 1 year b. You lend $700 and borrower promises to pay you $749 at the end of 1 year c. You borrow $8,500 and promise to pay back $201,229 at the end of 10 years d. You borrow $9,000 and promise to make payments of $2,684.80 at the end of each year for 5 years
You have approached your bank for a 30 year mortage loan in the sum of $2,160,000. The bank has agreed to lend you the money at the annual rate of 6.32% a Caluate the montly repayment on this loan b Compute the interest payment for the first month of the loan based on the answer in a.
Calculate the total amount of interest dollars you will pay the bank over the life of the loan. Round to the nearest dollar and assume end-of-month payments. Table 6.2 The Loan Amortization Schedule for a $5,000 Loan at 10% to Be Repaid in Four Years Year Amount Owed on the Principal at the Beginning of the Year (1) Interest Portion Annuity Payment (2) of the Annuity = (1) x 10% = (3) 1 $5,000.00 1577.35 500 2 (1) Amount Owed (ii) PMT (III) Interest on the Principal at the Beginning Portion of the 2nd year of the Year 2 3 4 Repayment of the Principal Portion of the Annuity = (2) (3) (4) 1077.35 (iv) Repayment of the Principal Portion of the 2nd year Outstanding Loan Balance at Year End, After the Annuity Payment = (1)-(4) = (5) 3922.65 (v) Outstanding Loan Balance at Year 2 End, after the Annuity Payment Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a 2000 b 6309 с 1309 d 500
Problem: Please answer the following questions regarding a $300,000 Mortgage Loan with monthly amortization over 30 years and an annual interest rate of 6%. What is the loan payment for a (30 year loan (360 monthly payments) of $300,000 at 6%? Question Answer What is the monthly payment amount? Loan Monthly Payment: How much interest and how much is principle on the first payment? Interest: Principle: How much interest and how much is principle on the second payment? Interest: Principle: If after the second payment an addition $10,000 was paid on principle. How much would the interest be on the third payment? Interest:
Years Annual interest rate financed 3.00% 3.25% 3.50% 3.75% 4.00% 4.25% 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 6.00% 6.25% 6.50% 6.75% 10 9.66 9.77 9.89 10.01 10.12 10.24 10.36 10.48 10.61 10.73 10.85 10.98 11.10 11.23 11.35 11.48 12 8.28 8.40 8.51 8.63 8.76 8.88 9.00 9.12 9.25 7.91 7.29 9.37 9.50 9.63 9.76 9.89 10.02 10.15 8.85 8.71 7.52 6.89 6.19 8.57 7.97 15 6.91 7.03 7.15 7.27 7.40 7.65 7.78 8.04 8.17 8.30 8.44 17 6.26 6.39 6.64 6.76 7.42 7.56 6.51 5.80 5.44 7.02 7.15 7.69 7.83 8.11 8.25 5.55 5.93 7.02 7.16 6.83 7.46 7.60 7.28 20 5.67 6.06 6.33 6.46 6.60 6.74 6.88 7.31 6.98 6.60 7.13 6.75 22 5.97 5.18 4.74 5.31 5.57 5.70 5.84 6.11 6.25 6.39 6.54 6.68 25 4.87 5.01 5.14 5.28 5.42 5.56 5.70 5.85 5.99 6.14 6.29 6.44 6.91 30 4.22 4.35 4.49 4.63 4.77 4.92 5.07 5.22 5.37 5.52 5.68 5.84 6.00 6.16 6.32 6.49 35 3.85 3.99 4.13 4.28 4.43 4.58 4.73 4.89 5.05 5.21 5.37 5.54 5.70 5.87 6.04 6.21
Find the APR of the loan given the amount of the loan the number and type of payments, and the add on interest rate. Loan amount, $12,000; three yearly payments; rate = 8%
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A mortgage has the following terms: Amount: $750,000 Rate: 6.25% Amortization (Years): 30 Term (Years): 20 Please determine the following: What is the Monthly Payment? In preparing an Income Statement, what is the Interest Expense for years 1 – 5? What is the Principal Balance at the end of year 6? What is the value of the loan at the expiration? If rates remain constant (flat), what would the benefit be to refinance this loan after year 10? do all the questions 1-5 and show the formulas in excel and show how you got it
4 (5) Assume a 30-year mortgage loan for $250,000 for 30 years at an annual rate of 6%. What would be your fixed annual and monthly payments? Enter the inputs into the appropriate cells 5 in column B and set this up so that your answers are displayed as positive values. Round all values to two places after the decimal point. 6 (6) For the loan in #5 , prepare the first two monthly payment rows of the amortization table. 7 8 LOAN AMOUNT 9 TERM OF LOAN N YEARS 10 ANNUAL INTEREST RATE 11 TERM OF LOAN IN MONTHS 12 MONTHLY INTEREST RATE 13 FIXED LOAN PAYMENT (ANNUAL) 14 FIXED LOAN PAYMENT (MONTHLY) 15 16 17 18 19 20 21 22 AMORTIZATION TABLE PAYMENT 1 2 BEGINNING BALANCE FIXED PAYMENT INTEREST PRINCIPAL ENDING BALANCE
You plan to borrow $43,100 at an 8.0% annual interest rate. The terms require you to amortize the loan with 7 equal end-of- year payments. How much interest would you be paying in Year 2? a. $3,110.63 b. $3,061.57 c. $7,665.11 d. $8,278.32 e. $3,448.00