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You are selling your house. The Smiths have offered you $200,000. They will pay you
immediately. The Joneses have offered you $275,000, but they can not pay you until three years
from today. The interest rate is 12 percent. Which offer should you choose?
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- Assume that you just inherited an annuity that will pay you $10,000 per year for 10 years, with the first payment being made today. A friend of your mother offers to give you $60,000 for the annuity. If you sell it, what rate of return would your mother’s friend earn on his investment? If you think a “fair” return would be 6%, how much should you ask for the annuity? What keys do I need to enter in a financial calculator to get the answers of (13.70%, $78,016.92)/ only show me the keys to enter in a financial calculaotr. not excel and not algebraYou want to buy a piece of land and the owner would sell it to you for $20,000 cash. Alternatively, he would let you pay for it with five annual installments of $5,000 each, the first one due right now. What is the implied interest rate here?Suppose you are offered the alternative of receiving either $2,007 at the end of five years or $1,500 today. There is no question that the $2.007 will be paid in full (i.e., there's no risk of nonreceipt). Assuming that the money will not be needed in the next five years, you would deposit the $1.500 in an account that pays i% interest. What value of i would make you indifferent to your choice between $1.500 today and the promise of $2,007 at the end of five years?
- You plan to purchase a house for $115,000 using a 30-year mortgage obtained from your local bank. You will make a down payment of 20 percent of the purchase price and monthlypayments. You will not pay off the mortgage early. a. Your bank offers you the following two options for payment: Option 1: Mortgage rate of 9 percent and zero points. Option 2: Mortgage rate of 8.85 percent and 2 points. Which option should you choose?You want to buy a home but not take out a mortgage. You want to buy it outright when you are able to do so. You estimate that the home you will want to buy will cost $500,000. You have $20,000 today to set aside for it. The bank will pay you 2.8% annual interest. How long will it be before you can buy your home?You plan to purchase a house for $250,000 using a 30-year mortgage obtained from your local bank. You will make a down payment of 20 percent of the purchase price and monthly payments. You will not pay off the mortgage early. Your bank offers you the following two options for payment: Option 1: Mortgage rate of 3.75 percent and zero points. Option 2: Mortgage rate of 3.50 percent and 2 points. Which of the following is correct? Round your calculations/answers to two decimals. I. In exchange for $4,000 up front, Option 2 reduces your monthly mortgage payments by $28.14. II. The present value of the monthly savings is less than the points paid up front. III. Option 1 is the better choice. Formulas and Equations M = where P is principal, M is periodic payment, y interest rate, PVIFAny% = In period j, principal repayment is AMj = M Interest payment is is Ij = M[ ]=M - AMj Group of answer choices I only II only I and II only II and III only I, II, and III
- You want to buy a house thatcosts $140,000. You have $14,000 for a down payment, but your credit is such that mortgagecompanies will not lend you the required $126,000. However, the realtor persuadesthe seller to take a $126,000 mortgage (called a seller take-back mortgage) at a rate of 5%,provided the loan is paid off in full in 3 years. You expect to inherit $140,000 in 3 years, butright now all you have is $14,000, and you can afford to make payments of no more than$22,000 per year given your salary. (The loan would call for monthly payments, but assumeend-of-year annual payments to simplify things.)a. If the loan was amortized over 3 years, how large would each annual payment be?Could you afford those payments?b. If the loan was amortized over 30 years, what would each payment be? Could youafford those payments?c. To satisfy the seller, the 30-year mortgage loan would be written as a balloon note,which means that at the end of the third year, you would have to make the…You plan to purchase a house for $166,000 using a 15-year mortgage obtained from your local bank. You will make a down payment of 15 percent of the purchase price. You will not pay off the mortgage early. Assume the homeowner will remain in the house for the full term and ignore taxes in your analysis. Your bank offers you the following two options for payment. Option 1: Mortgage rate of 7 percent and zero points Option 2: Mortgage rate of 6.75 percent and 3 points Which option should you choose? Option 1 None is the correct answer Option 2 Indifferent between the two optionsSuppose a property you are seeking to purchase is valued at $200,000. You can take out a loan of 80 percent from the bank, which amortizes in 30 years. The current market interest rate is 7.35 percent. Suppose you can only afford a monthly payment of USD 900, but the seller is desperate to sell this property. The seller has already lowered the selling price to USD 180,000. What is the minimum amount of rebate that the seller should provide to you in order to make you purchase the property?
- A life insurance co. is trying to sell you an investment policy that will pay you and your heirs $15,199 per year forever. If the policy costs $428,853 today, at what interest rate (in percent) is it properly priced? Answer to two decimals.Use a bankers year: 360 days To complete the sale of a house, the you accept a 240-day note for $9,000 at 7% simple interest. (Both interest and principal are repaid at the end of the 240 days.) Wishing to use the money sooner for the purchase of another house, the you sell the note to a third party for $9,108 after 80 days. What annual simple interest rate will the third party receive for the investment? Express your answer as a percentage.You plan to purchase a house for $295000 using a 30-year mortgage obtained from your local bank. You will make a down payment of 20 percent of the purchase price. You will not pay off the mortgage early. Your bank offers you the following two options for payment. Option 1: Mortgage rate of 5.35 percent and 1 point. Option 2: Mortgage rate of 5.25 percent and 2 points. Which option should you choose?