Todd and Samantha, a dual income couple in their early thirties, have seen a home that they really like. The home is listed for $600,000 and the vendor is firm on the price. The couple have saved $100,000 for down payment and have a maximum budget of $2000 per month for a mortgage loan payment. The have set this limit as they would still have to pay for property taxes and other expenses. The best mortgage loan offer they have is a 25 year loan with 5% compounded semi-annually from TruNord Mortgages Inc. Can Todd and Samantha afford the $600,000 home given the provision for down payment and their maximum budget?

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
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Todd and Samantha, a dual income couple in their early thirties, have seen a home that they really like. The home is
listed for $600,000 and the vendor is firm on the price. The couple have saved $100,000 for down payment and have
a maximum budget of $2000 per month for a mortgage loan payment. The have set this limit as they would still have
to pay for property taxes and other expenses.
The best mortgage loan offer they have is a 25 year loan with 5% compounded semi-annually from TruNord
Mortgages Inc. Can Todd and Samantha afford the $600,000 home given the provision for down payment and their
maximum budget?
a. Yes, because the large down payment reduces the loan needed sufficiently to make the payment of $2,000
per month adequate.
b. Yes, because the large down payment and dual income qualifies them for the loan.
C.
Yes. With a 5% down payment of 100,000, they can even afford a $2,000,000 home.
d. No, because the loan they need is lower than the loan amount they can afford with $2,000 per month.
e. No, because the loan they need to buy the home will require a larger payment than their maximum budget of
$2,000 per month.
Transcribed Image Text:Todd and Samantha, a dual income couple in their early thirties, have seen a home that they really like. The home is listed for $600,000 and the vendor is firm on the price. The couple have saved $100,000 for down payment and have a maximum budget of $2000 per month for a mortgage loan payment. The have set this limit as they would still have to pay for property taxes and other expenses. The best mortgage loan offer they have is a 25 year loan with 5% compounded semi-annually from TruNord Mortgages Inc. Can Todd and Samantha afford the $600,000 home given the provision for down payment and their maximum budget? a. Yes, because the large down payment reduces the loan needed sufficiently to make the payment of $2,000 per month adequate. b. Yes, because the large down payment and dual income qualifies them for the loan. C. Yes. With a 5% down payment of 100,000, they can even afford a $2,000,000 home. d. No, because the loan they need is lower than the loan amount they can afford with $2,000 per month. e. No, because the loan they need to buy the home will require a larger payment than their maximum budget of $2,000 per month.
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