Suppose you decide to borrow $330,000 of cash to purchase a house and take out a 20-year fixed rate mortgage that has a quoted rate of 8% per year. (Please keep a large number of digits in the calculations below. In particular it is important to have your answers correct to the dollar.) a) What is the size of your monthly payment? b) Suppose that just after making your 60th monthly payment, mortgage rates are quoted at 6% per year for both 10-year and 30-year mortgages. Suppose you decide to refinance using a 30-year mortgage. What is your gain from refinancing (ignoring transactions costs)?
Suppose you decide to borrow $330,000 of cash to purchase a house and take out a 20-year fixed rate mortgage that has a quoted rate of 8% per year. (Please keep a large number of digits in the calculations below. In particular it is important to have your answers correct to the dollar.) a) What is the size of your monthly payment? b) Suppose that just after making your 60th monthly payment, mortgage rates are quoted at 6% per year for both 10-year and 30-year mortgages. Suppose you decide to refinance using a 30-year mortgage. What is your gain from refinancing (ignoring transactions costs)?
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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Suppose you decide to borrow $330,000 of cash to purchase a house and
take out a 20-year fixed rate mortgage that has a quoted rate of 8% per year.
(Please keep a large number of digits in the calculations below. In particular it is important
to have your answers correct to the dollar.)
a) What is the size of your monthly payment?
b) Suppose that just after making your 60th monthly payment, mortgage rates are quoted
at 6% per year for both 10-year and 30-year mortgages. Suppose you decide to refinance
using a 30-year mortgage. What is your gain from refinancing (ignoring transactions
costs)?
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