You’ve decided to buy a house that is valued at $1 million. You have $250,000 to use as a down payment on the house, and want to take out a mortgage for the remainder of the purchase price. Your bank has approved your $750,000 mortgage, and is offering a standard 30-year mortgage at a 10% fixed nominal interest rate (called the loan’s annual percentage rate or APR). Under this loan proposal, your mortgage payment will be per month. (Note: Round the final value of any interest rate in percentage form to four decimal places.) Your friends suggest that you take a 15-year mortgage, because a 30-year mortgage is too long and you will pay a lot of money on interest. If your bank approves a 15-year, $750,000 loan at a fixed nominal interest rate of 10% (APR), then the difference in the monthly payment of the 15-year mortgage and 30-year mortgage will be . (Note: Round the final value of any interest rate in percentage form to four decimal places.) It is likely that you won’t like the prospect of paying more money each month, but if you do take out a 15-year mortgage, you will make far fewer payments and will pay a lot less in interest. How much more total interest will you pay over the life of the loan if you take out a 30-year mortgage instead of a 15-year mortgage? $1,083,545.86 $1,267,197.70 $918,259.20 $1,175,371.78 Which of the following statements is not true about mortgages? The ending balance of an amortized loan contract will be zero. Mortgages always have a fixed nominal interest rate. Mortgages are examples of amortized loans. The payment allocated toward principal in an amortized loan is the residual balance—that is, the difference between total payment and the interest due

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 15P

See similar textbooks

Related questions

Concept explainers

Question

You’ve decided to buy a house that is valued at $1 million. You have $250,000 to use as a down payment on the house, and want to take out a mortgage for the remainder of the purchase price. Your bank has approved your $750,000 mortgage, and is offering a standard 30-year mortgage at a 10% fixed nominal interest rate (called the loan’s annual percentage rate or APR). Under this loan proposal, your mortgage payment will be per month. (Note: Round the final value of any interest rate in percentage form to four decimal places.)

Your friends suggest that you take a 15-year mortgage, because a 30-year mortgage is too long and you will pay a lot of money on interest. If your bank approves a 15-year, $750,000 loan at a fixed nominal interest rate of 10% (APR), then the difference in the monthly payment of the 15-year mortgage and 30-year mortgage will be . (Note: Round the final value of any interest rate in percentage form to four decimal places.)

It is likely that you won’t like the prospect of paying more money each month, but if you do take out a 15-year mortgage, you will make far fewer payments and will pay a lot less in interest. How much more total interest will you pay over the life of the loan if you take out a 30-year mortgage instead of a 15-year mortgage?

$1,083,545.86

$1,267,197.70

$918,259.20

$1,175,371.78

Which of the following statements is not true about mortgages?

The ending balance of an amortized loan contract will be zero.

Mortgages always have a fixed nominal interest rate.

Mortgages are examples of amortized loans.

The payment allocated toward principal in an amortized loan is the residual balance—that is, the difference between total payment and the interest due.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 3 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.