W has taken loan of $50,000 at 4.2% interest rate and need to make monthly payments for 10 years. Present value of an annuity is the current value of future payment or the present value of a series of future periodic payments made at the end of each payment period. P V Annuity = P M T [ 1 − 1 ( 1 + r ) n r ] Here, The present value of an annuity is “ P V Annuity ”. The periodic payments are “ PMT ”. The interest rate is “ r ”. The maturity period of number of years is “ n ”.

Question

4. On August 20, Mr. and Mrs. Cleaver decided to buy a property from Mr. and Mrs. Ward for $105,000. On August 30, Mr. and Mrs. Cleaver obtained a loan commitment from OKAY National Bank for an $84,000 conventional loan at 5 percent for 30 years. The lender informs Mr. and Mrs. Cleaver that a $2,100 loan origination fee will be required to obtain the loan. The loan closing is to take place September 22. In addition, escrow accounts will be required for all prorated property taxes and hazard insurance; however, no mortgage insurance is necessary. The buyer will also pay a full year's premium for hazard insurance to Rock of Gibraltar Insurance Company. A breakdown of expected settlement costs, provided by OKAY National Bank when Mr. and Mrs. Cleaver inspect the uniform settlement statement as required under RESPA on September 21, is as follows: I. Transactions between buyer-borrower and third parties: a. Recording fees--mortgage b. Real estate transfer tax c. Recording fees/document…

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Chapter 4, Problem 23PROB

Summary Introduction

W has taken loan of $50,000 at 4.2% interest rate and need to make monthly payments for 10 years.

Present value of an annuity is the current value of future payment or the present value of a series of future periodic payments made at the end of each payment period.

PVAnnuity=PMT[1−1(1+r)nr]

Here,

The present value of an annuity is “PVAnnuity”.

The periodic payments are “PMT”.

The interest rate is “r”.

The maturity period of number of years is “n”.

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4. On August 20, Mr. and Mrs. Cleaver decided to buy a property from Mr. and Mrs. Ward for $105,000. On August 30, Mr. and Mrs. Cleaver obtained a loan commitment from OKAY National Bank for an $84,000 conventional loan at 5 percent for 30 years. The lender informs Mr. and Mrs. Cleaver that a $2,100 loan origination fee will be required to obtain the loan. The loan closing is to take place September 22. In addition, escrow accounts will be required for all prorated property taxes and hazard insurance; however, no mortgage insurance is necessary. The buyer will also pay a full year's premium for hazard insurance to Rock of Gibraltar Insurance Company. A breakdown of expected settlement costs, provided by OKAY National Bank when Mr. and Mrs. Cleaver inspect the uniform settlement statement as required under RESPA on September 21, is as follows: I. Transactions between buyer-borrower and third parties: a. Recording fees--mortgage b. Real estate transfer tax c. Recording fees/document…

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