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

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

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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Assume that you wish to trade in your old car and buy a new car. The new car has a list price of $31,500.00 and you have been offered a 6-year (72-month) car loan at a nominal annual interest rate of 3.84 percent (monthly compounding). Also assume that you want your monthly payments to be no more than $300 a month and will walk away from the deal if they are higher. Given this information, determine the minimum trade-in that the dealer must offer you on your old car in order to get you to buy the new car. O $11.592.97 O $10.926.03 $12,235.13 O $10,107.86 Ⓒ$9,666.48
Suppose Lydia needs to borrow $24,200 for the purchase of a car and is considering two loan options. Loan A is a seven-year loan at 8.8% interest while loan B is a six-year loan at 8.3% interest.Determine the monthly payment required to repay Loan A and the total interest paid over the life of Loan A. Round solutions to the nearest cent, if necessary.The monthly payment for Loan A is $ Incorrect.The total interest paid for Loan A is $ Incorrect.Determine the monthly payment required to repay Loan B and the total interest paid over the life of Loan B. Round solutions to the nearest cent, if necessary.The monthly payment for Loan B is $ Incorrect.The total interest paid for Loan B is $ Incorrect.Determine the lower-cost option of the two loans. Loan A is the lower-cost option. Loan B is the lower cost option. Determine the amount of savings Lydia will experience if she chooses the lower-cost loan option.Savings = $
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely.
You are borrowing $250,000 to buy a house, using a standard, 30-year mortgage. Your mortgage lender offers a 5.50% mortgage with no points, or an X% mortgage with 0.80 points. You plan on living in the house for exactly 31 months, paying only the required payment each month, and without refinancing your mortgage. What rate for the mortgage with points will make you indifferent between the two mortgages? Calculate a nominal rate, with monthly compounding. Use the 5.50% rate to discount cash flows between the two options. Note: all rates in the problem are nominal annual rates with monthly compounding. Recall, 1 point is 1% of the mortgage. Enter your answer in decimal format, to 4 decimal places. truncated. For example, if your answer is 5.518%, answer "0.0551".
You have a loan outstanding. It requires making three annual payments of $8,000 each at the end of the next three years. Your bank has offered to allow you to skip making the next two payments in lieu of making one large payment at the end of the loan's term in three years. If the interest rate on the loan is 5%, what final payment will the bank require you to make so that it is indifferent to the two forms of payment? The final payment the bank will require you to make is $ (Round to the nearest dollar.)
Please show how to solve this using excel and please show all formulas in the spreadsheet please!! Thomas decides to buy a house with price of $450,000. Thomas puts 20% down payment and considers a 30-year fixed rate mortgage to pay the remaining balance. The lender offers Thomas two choices of the mortgage with monthly payments shown in the table as choice 1 and choice 2, assume that the origination cost is $6,000. A. If you hold the loan for 30 years, what is the effective cost for each choice? B. How about the effective cost for each choice if the loan will only be outstanding for 5 years (60 months) (i.e. the borrow will pay off the loan at the end of 60 months)?
A couple visits an open house and fall in love with the floor plan and location. They tell the host they would love to buy the house but do not know if they can afford it. In the conversation, the broker learns that they are currently paying $1750 per month for rent. Would the principal and interest payments be within the amount of their current rent if the price is $249,000 with interest rates for a zero down, 30 years mortgage at 5% interest? Note: 30 years of 5% interest is $5.37. A. Only if they have a 20% down payment. B. No, the payment is more than their current rent amount C. There is not enough information to determine an answer D. Yes, the payment is within the range of their current rent amount.
The price of a condominium is $187,000. The bank requires a 5% down payment and one point at the time of closing. The cost of the condominium is financed with a 30-year fixed-rate mortgage at 6.5%. Use the following formula to determine the regular payment amount. Complete parts (a) through (e) below. PMT = a. Find the required down payment. $9350 b. Find the amount of the mortgage. $177650 c. How much must be paid for the one point at closing? $1776 (Round to the nearest dollar as needed.) d. Find the monthly payment (excluding escrowed taxes and insurance). More Enter your answer in each of the answer boxes. 11:12 PM O Type here to search 81°F Mostly cloudy 22 99+ 6/30/2021 DELL F3 F4 FS F6 F7 F8 F9 F10 F11 F12 PrtScr Insert Delete కలnn Home Num $4 %24 & Backspace 8. R T K Enter (凸)
Use PMT= to determine the regular payment amount, rounded to the nearest dollar. The price of a home is $230,000. The bank requires a 20% down payment and three points at the time of closing. The cost of the home is financed with a 30-year foxed-rate mortgage at 6.5%. Complete parts (a) through (e) below. a. Find the required down payment. $ 46,000 b. Find the amount of the mortgage.
As a graduating senior with a promising career in finance, Central Bank offers you a mortgage of $200,000. You may choose between a 30-year mortgage with an interest rate of 4.375% or a 15-year mortgage at 3.500%. Both interest rates are annual stated rates with interest compounded monthly. Assume that for 30-year mortgage, the bank requires you to pay 1% point. Compute an amortization table that shows the amount of interest you can report for taxes and amount of principal payment each year for each loan. Use two different ways to do it as we did in class: with and without using the functions PPMT and IPMT. PLEASE USE EXCEL and show functions.
A friend asks to borrow $48 from you and return will pay you $51 in one year. If your bank is offering a 6.5% interest rate on deposits and loans: a. How much would you have in one year if you deposited the $48 instead? b. How much money could you borrow today if you pay the bank $51 in one year? c. Should you loan the money to your friend or deposit it in the bank? D
You have a loan outstanding. It requires making four annual payments of $8,000 each at the end of the next four years. Your bank has offered to allow you to skip making the next three payments in lieu of making one large payment at the end of the loan's term in four years. If the interest rate on the loan is 2%, what final payment will the bank require you to make so that it is indifferent to the two forms of payment? The final payment the bank will require you to make is $ (Round to the nearest dollar.)

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