- Three years ago you bought a home for $150,000 using a fully amortizing loan with a 5% down payment, an interest rate of 4.5%, and a term of 30 years. The loan is fully amortizing. If you sell the house today for $160,000, and you have to pay your real estate agent a 6% commission, what is the annual growth rate of your equity (down payment) over the 3 years? Ignore the monthly payment for purposes of this calculation. a. 23.59% b. 18.49% c. -3.5% d. 10.2%

- Three years ago you bought a home for $150,000 using a fully amortizing loan with a 5% down payment, an interest rate of 4.5%, and a term of 30 years. The loan is fully amortizing. If you sell the house today for $160,000, and you have to pay your real estate agent a 6% commission, what is the annual growth rate of your equity (down payment) over the 3 years? Ignore the monthly payment for purposes of this calculation. a. 23.59% b. 18.49% c. -3.5% d. 10.2%

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 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?
You have been living in the house you bought 7 years ago for $300,000. At that time, you took out a loan for 80% of the house at a fixed rate 15-year loan at an annual stated rate of 8.0%. You have just paid off the 84th monthly payment. Interest rates have meanwhile dropped steadily to 6.0% per year, and you think it is finally time to refinance the remaining balance over the residual loan life. But there is a catch. The fee to refinance your loan is $5,000. Should you refinance the remaining balance? How much would you save/lose if you decided to refinance? a. Yes, gain $7,287.20 b. No, lose $12,287.20 c. Yes, gain $12,287.20 d. No, lose $7,287.20
Suppose you want to purchase a home for $525,000 with a 30-year mortgage at 4.84% interest. Suppose also that you can put down 30%. What are the monthly payments? (Round your answer to the nearest cent.) $ What is the total amount paid for principal and interest? (Round your answer to the nearest cent.) $ What is the amount saved if this home is financed for 15 years instead of for 30 years? (Round your answer to the nearest cent.)
You have just received a windfall from an investment you made in a friend's business. She will be paying you $26,016 at the end of this year, $52,032 at the end of next year, and $78,048 at the end of the year after that (three years from today). The interest rate is 11.4% per year. a. What is the present value of your windfall? b. What is the future value of your windfall in three years (on the date of the last payment)?
= You would like to buy a house that costs $350,000. You have $55,000 in cash that you can put down on the house, but you need to borrow the rest of the purchase price. The bank is offering a 30-year mortgage that requires annual payments and has an interest rate of 7% per year. You can afford to pay only $23,060 per year. The bank agrees to allow you to pay this amount each year, yet still borrow $295,000. At the end of the mortgage (in 30 years), you must make a balloon payment; that is, you must repay the remaining balance on the mortgage. How much will this balloon payment be? The balloon payment is $ (Round to the nearest cent.)
Assume you buy a house for $660,000 and have $132,000 as a down payment. Your mortgage rate is 3 percent APR compounded semi-annually and you amortize the mortgage over 25 years with monthly payments. You will assume that you could have earned 5 percent EAR on the down payment (opportunity cost), your marginal income tax rate is 40 percent, real estate fees are 4 percent +HST and property taxes will be $6,600 annually for this calculation. Ignore maintenance costs. a. What is the true return on your investment if you sell it in 6 years for $1,040,000? (Do not round your intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.) Return on Investment % b. What is an approximate annualized rate of return on your investment? (Do not round your intermediate calculations. Round your answer to 3 decimal places. Omit the "%" sign in your response.) Annualized Rate of Return %
Your new 30-year mortgage includes borrowing $425,000 at an APR of 4.78%. If you paid 20% down when you bought this house, and if the value of the property grows at about 3.0% a year, how much will you have to invest if you seel the house after 14 years? (Ignore here any taxes or fees on the purchase or sale of the house.)
You are buying a house for $290,000.00 with a downpayment of $29,000.00. The loan will be paid back over 20 years with monthly payments of $1,609.25. If the interest rate is 4.2% compounded monthly, what would the unpaid balance be immediately after the eleventh payment? What is the equity after the eleventh payment? The unpaid balance would be $ The equity would be $
The NOI for the first year of your property is expected to be $100,000, and grow at 5% per year. You financed the property with a $500,000 mortgage at 8% and an amortization term of 20 years. If the selling costs are 5% and the outgoing cap rate is 10%, what is the before tax equity reversion if you sell at the end of year 5?
Suppose that you invest $50,000 into a downpayment on a $250,000 house, which has a price appreciation of 3% per year. Your mortgage is fixed at $ 36,000 per year, and your tenants pay you $24,000 per year. Property taxes, maintenance, and other expenses cost $5,000 per year. Suppose that after 25 years, you sell your property. Would it have been better to invest $ 50,000 in the stock market, assuming it has returns of 9% per year over the same time period (25 years)? Why? Show your calculations and justify your answer. For the purposes of this question, suppose that inflation is zero.

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