Explanation Given: In both the options, the mortgage amount is $ 160 , 000 , the term of the mortgageis 30 years, one-yeartreasury index is 0.2 % and the margin is 2.8 % . In option two, the buyer has used the seller buydown discount which is at the initial rate of 0.5 % . Refer to the monthly payment to repay principal and interest on a $ 1 , 000 mortgage Table 7 on page no 734. Formula used: ARM interest rate = index rate + margin rate . R = P ( r 12 ) 1 − ( 12 12 + r ) 12 t Where, R is monthly payment and P is the principal and t is time and (r) is interest rate. Calculation: In the option one, ARM interest rate is calculated as: ARM interest rate = index rate + margin rate = 0.2 % + 2.8 % = 3 % As per table 7, monthly payment to repay principal and interest, the mortgage amount of $1,000s is $ 160 , 000 and the intersection of 3.0 % row with the 30 -year column in Table 7 is $ 4.21604 . In order to get to the total payment ( R ), Table 7 needs to be referred and the following formulae need to be used: R = Principal Amount × Intersection of 3 .0% row with 30 years column in table7 = $160,000 $ 1 , 000 × $ 4.21604 =$160 × $ 4.21604 =$674 .57 Thus, the payment is $674 .57 . Now, for the fourth year, the ARM interest rate is calculated as: ARM interest rate = index rate + margin rate = 1.4 % + 2.8 % = 4.2 % Thus, the ARM interest rate for the fourth year is 4.2 % . The fourth-year monthly payment is calculated as: R = P ( r 12 ) 1 − ( 12 12 + r ) 12 t = $ 149 , 670.66 ( 0.042 12 ) 1 − ( 12 12 + 0.042 ) 12 × 27 = $ 149 , 670

Mathematical Ideas (13th Edition) - Standalone book

13th Edition

ISBN: 9780321977076

Author: Charles D. Miller, Vern E. Heeren, John Hornsby, Christopher Heeren

Publisher: PEARSON

See similar textbooks

Concept explainers

Unitary Method

The word “unitary” comes from the word “unit”, which means a single and complete entity. In this method, we find the value of a unit product from the given number of products, and then we solve for the other number of products.

Speed, Time, and Distance

Imagine you and 3 of your friends are planning to go to the playground at 6 in the evening. Your house is one mile away from the playground and one of your friends named Jim must start at 5 pm to reach the playground by walk. The other two friends are 3 …

Profit and Loss

The amount earned or lost on the sale of one or more items is referred to as the profit or loss on that item.

Units and Measurements

Measurements and comparisons are the foundation of science and engineering. We, therefore, need rules that tell us how things are measured and compared. For these measurements and comparisons, we perform certain experiments, and we will need the experime…

Videos

Question

Chapter 13.4, Problem 61E

To determine

To calculate: The difference in the fourth-year monthly payment of two options when interest rate and term are same if the mortgage amount is $160,000, the term of the mortgage is 30 years, one-year index is 0.2% and the margin is 2.8%.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 13.4, Problem 60E

Chapter 13.4, Problem 62E

Students have asked these similar questions

No it is not a graded assignment, its a review question but i only have the final answer not the working or explanation

solving problem 1

Class, the class silues, and the class notes, whether the series does alternate and the absolute values of the terms decrease), and if the test does apply, determine whether the series converges or diverges. For the ith series, if the test does not apply the let Mi = 2, while if the test determines divergence then M¿ = 4, and if it determines convergence then M¿ = 8. 1: 2: 3 : 4: 5 : ∞ n=1 ∞ (−1)n+1. Σ(-1) +1 n=1 ∞ п 3m² +2 Σ(-1)+1 sin(2n). n=1 ∞ 2n² + 2n +3 4n2 +6 1 e-n + n² 3n23n+1 9n² +3 In(n + 1) 2n+1 Σ(-1) +1 n=1 ∞ Σ(-1)". n=1 Then the value of cos(M₁) + cos(2M2) + cos(3M3) + sin(2M4) + sin(M5) is 1.715 0.902 0.930 -1.647 -0.057 ● 2.013 1.141 4.274

Chapter 13 Solutions

Mathematical Ideas (13th Edition) - Standalone book

Ch. 13.1 - In the following exercises, assume whenever...Ch. 13.1 - In the following exercises, assume whenever...Ch. 13.1 - In the following exercises, assume whenever...Ch. 13.1 - In the following exercises, assume whenever...Ch. 13.1 - In the following exercises, assume whenever...Ch. 13.1 - In the following exercises, assume whenever...Ch. 13.1 - Find the future value of each deposit if the...Ch. 13.1 - Find the future value of each deposit if the...Ch. 13.1 - Find the future value of each deposit if the...Ch. 13.1 - Find the future value of each deposit if the...

Knowledge Booster

Learn more about

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

The difference in the fourth-year monthly payment of two options when interest rate and term are same if the mortgage amount is $ 160 , 000 , the term of the mortgage is 30 years, one-year index is 0.2 % and the margin is 2.8 % .

Solution Summary: The author explains that the difference in the fourth-year monthly payments is due to the seller buydown.

Concept explainers

Videos

To calculate: The difference in the fourth-year monthly payment of two options when interest rate and term are same if the mortgage amount is $160,000, the term of the mortgage is 30 years, one-year index is 0.2% and the margin is 2.8%.

Want to see the full answer?

Chapter 13 Solutions