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Seth and Alexandrea Moore of Elk Grove Village, Illinois have annual income of $110,000 and want to buy a home. Currently, mortgage rates are 5%. The Moores want to take a mortgage for 30 years. Real estate taxes are $4,800 per year for home similar to what they would like to buy, and homeowner's insurance would be about $1,500 per year. a. Using a 28% front-end ratio, what are the total annual and monthly expenditures for which they would qualify? b. Using a 36 percent back-end ratio, what monthly mortgage payment (including taxes and insurance) could they afford given that they have an automobile loan payment of $470, a student loan payment of $350, and credit card payments of $250? c. Using a 36 percent back-end ratio, IF Moores had zero debt, what monthly mortgage payment (including taxes and insurance) could they afford?

Seth and Alexandrea Moore of Elk Grove Village, Illinois have annual income of $110,000 and want to buy a home. Currently, mortgage rates are 5%. The Moores want to take a mortgage for 30 years. Real estate taxes are $4,800 per year for home similar to what they would like to buy, and homeowner's insurance would be about $1,500 per year. a. Using a 28% front-end ratio, what are the total annual and monthly expenditures for which they would qualify? b. Using a 36 percent back-end ratio, what monthly mortgage payment (including taxes and insurance) could they afford given that they have an automobile loan payment of $470, a student loan payment of $350, and credit card payments of $250? c. Using a 36 percent back-end ratio, IF Moores had zero debt, what monthly mortgage payment (including taxes and insurance) could they afford?

Essentials Of Investments
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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My question is about personal financial planning, I have the questions attached below for the hw set. thanks in advance. 

File Tools View Homework Assignment Set 5 - Chapters 8 & 9.docx Protected View Saved to this PC • Chapter 9 - Problem #4 Chapter 9 - Problem #2 Seth and Alexandrea Moore of Elk Grove Village, Illinois have annual income of $110,000 and want to buy a home. Currently, mortgage rates are 5%. The Moores want to take a mortgage for 30 years. Real estate taxes are $4,800 per year for home similar to what they would like to buy, and homeowner's insuränce would be about $1,500 per year. Kevin Tutumbo of Terre Haute, Indiana, has owned his home for 15 years and expect to live in it for at least five more. He originally borrowed $ 135,000 at 6% interest for 30 years to buy the home. He still owes $96,000 on the loan. Interest rates have since fallen to 4.5%, and Kevin is considering refinancing the loan for 15 years. He would have to pay 2 points on the new loan with no prepayment penalty on the current loan. a. What is Kevin's current monthly payment? a. Using a 28% front-end ratio, what are the total annual and monthly expenditures for which they would qualify? b. Using a 36 percent back-end ratio, what monthly mortgage payment (including taxes and insurance) could they afford given that they have an automobile loan payment of $470, a student loan payment of $350, and credit card payments of $250? b. Calculate the monthly payment on the new loan. $734.39 c. Using a 36 percent back-end ratio, IF Moores had zero debt, what monthly mortgage payment (including taxes and insurance) could they afford? c. Advice Kevin on whether he should refinance his mortgage. $2,102.76 D Focus Screens 3-4 of 4 ins
Transcribed Image Text:File Tools View Homework Assignment Set 5 - Chapters 8 & 9.docx Protected View Saved to this PC • Chapter 9 - Problem #4 Chapter 9 - Problem #2 Seth and Alexandrea Moore of Elk Grove Village, Illinois have annual income of $110,000 and want to buy a home. Currently, mortgage rates are 5%. The Moores want to take a mortgage for 30 years. Real estate taxes are $4,800 per year for home similar to what they would like to buy, and homeowner's insuränce would be about $1,500 per year. Kevin Tutumbo of Terre Haute, Indiana, has owned his home for 15 years and expect to live in it for at least five more. He originally borrowed $ 135,000 at 6% interest for 30 years to buy the home. He still owes $96,000 on the loan. Interest rates have since fallen to 4.5%, and Kevin is considering refinancing the loan for 15 years. He would have to pay 2 points on the new loan with no prepayment penalty on the current loan. a. What is Kevin's current monthly payment? a. Using a 28% front-end ratio, what are the total annual and monthly expenditures for which they would qualify? b. Using a 36 percent back-end ratio, what monthly mortgage payment (including taxes and insurance) could they afford given that they have an automobile loan payment of $470, a student loan payment of $350, and credit card payments of $250? b. Calculate the monthly payment on the new loan. $734.39 c. Using a 36 percent back-end ratio, IF Moores had zero debt, what monthly mortgage payment (including taxes and insurance) could they afford? c. Advice Kevin on whether he should refinance his mortgage. $2,102.76 D Focus Screens 3-4 of 4 ins
File Tools View Homework Assignment Set 5- Chapters 8 & 9.docx - Protected View Saved to this PC - Homework Problem Set 5 Chapters 8 and 9 Chapter 8 - Problem #4 Chapter 8 - Problem #3 Amanda Forsythe of Springfield, Missouri, must decide whether to buy or lease a car she has selected. She has negotiated a purchase price (gross capitalized cost) of $35,000 and could borrow the money to buy from her credit union by putting $3,000 down and paying $751.68 per month for 48 months at 6% APR. Alternatively, she could lease the car for 48 month at 495 per month by paying a $3,000 capitalized cost reduction and a $350 disposition fee on her car, which is projected to have a residual value of $12,000 at the end of the lease. Run the numbers to advise Amanda about whether she should finance or lease the car. Kyle Parker of Concord, New Hampshire, has been shopping for a new car for several weeks. He has negotiated a price of $34,000 on a model that carry a choice of a $2,500 rebate or dealer financing at 2 percent APR. The dealer loan would require a $1,000 down payment and monthly payment of $ 578 for 60 months. Kyle has also arranged for a loan from his bank with a 5% APR. Run the numbers to advise Kyle about whether he should use the dealer financing or take the rebate and get financing from the bank. DFocus Seneent T-2 of 4 F11 F12 ins del F5 F6 F7 F8 F10 FT F2 F3 F4 DIG 44
Transcribed Image Text:File Tools View Homework Assignment Set 5- Chapters 8 & 9.docx - Protected View Saved to this PC - Homework Problem Set 5 Chapters 8 and 9 Chapter 8 - Problem #4 Chapter 8 - Problem #3 Amanda Forsythe of Springfield, Missouri, must decide whether to buy or lease a car she has selected. She has negotiated a purchase price (gross capitalized cost) of $35,000 and could borrow the money to buy from her credit union by putting $3,000 down and paying $751.68 per month for 48 months at 6% APR. Alternatively, she could lease the car for 48 month at 495 per month by paying a $3,000 capitalized cost reduction and a $350 disposition fee on her car, which is projected to have a residual value of $12,000 at the end of the lease. Run the numbers to advise Amanda about whether she should finance or lease the car. Kyle Parker of Concord, New Hampshire, has been shopping for a new car for several weeks. He has negotiated a price of $34,000 on a model that carry a choice of a $2,500 rebate or dealer financing at 2 percent APR. The dealer loan would require a $1,000 down payment and monthly payment of $ 578 for 60 months. Kyle has also arranged for a loan from his bank with a 5% APR. Run the numbers to advise Kyle about whether he should use the dealer financing or take the rebate and get financing from the bank. DFocus Seneent T-2 of 4 F11 F12 ins del F5 F6 F7 F8 F10 FT F2 F3 F4 DIG 44
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