Question: A bank issues a $100,000 fixed-rate 30-year mortgage with a nominal annual rate of 4.5%. If the required rate drops to 4.0% immediately after the

A bank issues a $100,000 fixed-rate 30-year mortgage with a nominal annual rate of 4.5%. If the required rate drops to 4.0% immediately after the mortgage is issued, what is the impact on the value of the mortgage?

Step by Step Solution

★★★★★

3.48 Rating (164 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

At 45 the required payment is calculated as PV 1000... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

195-B-F-F-M (1538).docx

120 KBs Word File

Students Have Also Explored These Related Finance Questions!

Delta Fund, a South African-based investment fund, which has USD 400 million invested in a USD Property Fund and EUR500M invested in Euro Fund. Sanlam Fund home currency is the South African rand...

Johnny took out a $500,000 30 year mortgage with an APR of 6.95%. The first month he made an extra payment of $1,000. What was his balance at the end of the first month?

A bank offers both adjustable rate and fixed rate mortgage loans on residential properties, which are classified into three categories: single family houses, condominiums, and multifamily dwellings....

Required: a) The Chief Risk Officer ("CRO") for JCUS Bank has the following Asset/Liability profile (in USS billions). If the CRO wants a duration gap of 3.5, how much should the bank raise in...

Required: a) The Chief Risk Officer ("CRO") for JCUS Bank has the following Asset/Liability profile (in US\$ billions). If the CRO wants a duration gap of 3.5, how much should the bank raise in...

Required: a) The Chief Risk Officer ("CRO") for JCUS Bank has the following Asset/Liability profile (in US $ billions). If the CRO wants a duration gap of 3.5, how much should the bank raise in...

23. A bank issues a $100,000 fixed-rate 30-year mort- gage with a nominal annual rate of 4.5%. If the required rate drops to 4.0% immediately after the mortgage is issued, what is the impact on the...

1. Given the duration of a $100,000 fixed-rate, 30-year mortgage with a nominal annual rate of 7.0% is equal to 10.15. What is the expected percentage change in value if the required rate drops to...

Quantitative Problem 3. Calculate the duration of a $100,000 fixed-rate, 30-year mortgage with a nominal annual rate of 7.0%. What is the expected percentage change in value if the required rate...

Calculate the duration of a $100,000 fixed-rate 30-year mortgage with a nominal annual rate of 7.0%. What is the expected percentage change in value if the required rate drops to 6.5% immediately...

PROBLEM 4.3.* Suppose that a continuous-time sinusoid (t) is sampled at a sampling rate of 6000 samples/sec, resulting in the following discrete-time signal: x[n] = 6cos(n/3 + 0.1). Knowing x[n] does...

Several transactions from Gallino Corp. are listed. Gallino Corp. purchased inventory from Wilen, Inc. on account. Gallino paid shipping for the merchandise to be shipped from Wilen, Inc. to...

, 6 The Benson CPA firm is considering utilizing an offshore service provider to prepare many of its tax returns. In this regard, what ethical considerations must be taken into account?

Describe the makeup and the purpose of the First Screen.

Refer to the stock market quote in Table. a. What was the closing stock price for Abbott Laboratories on July 25, 2013? b. What were the high and low prices at which McGraw-Hill traded between July...

At the beginning of the year, you purchased a share of stock for $ 35. Over the year the dividends paid on the stock were $ 2.75 per share. a. Calculate the return if the price of the stock at the...

Use the information in the following stock quote to calculate McKessons earnings per share over the last year. (2) (3) (4) (5 6 7) (89 (10)1) (12) 13) (14) (15) 52 week 52 week Div Yield PE %C Close...

Which of these distributions would be LEAST flat and wide? Group of answer choices t-distribution for samples of size n=40 normal distribution t-distribution for samples of size n=30 t-distribution...

Which statement is true? A. An efficient portfolio always provides the highest expected rate of return. B. An efficient portfolio has less risk than any other asset or portfolio with comparable...

-okmarks Profiles Tab Window Help + 27,1quiz2eslsecurediockdown The weight of Bill's pack as he sets off on a backpacking trip is 48 lb. Does the data come from a discrete or continuous data set? 0...