1. The 30 year fixed rate mortgage (plan A) is analyzed below, No taxes are considered on proceeds from the savings or investments. Plan A analysis-30-year fixed rate loan Amount of money required for closing costs Down Payment (10% of $440,000) Upfront fees (registration, survey, attorney) $ 44.000 $3,000 Total The amount of the loan is $396,000 and equivalent monthly principal and interest (P & determined at 525% /12 0.4375% per month for 30 (12) 360 months. As (396,000(A/P. 0.4375%, 3600 = 396,000(0005522)-$2186 Add the taxes and Insurance (T&I) of $500 for a total payment of: Payment A $ 2186+ 500 $2687 The future worth of Plan A is the sum of 3 future worth remainder of the $60,000 available after the closing costs, Fux), left over money from that available from monthly payments (Fax) and the increase in the house value when it is sold after 10 years (F F,.-(60,000-47,000)(F/P 0.5%, 120)-S23652 Money available each month to invest after the mortgage payment and the future worth after 10 years is 3000-2687 S313 F2A. 313 ( F/A 0.5%, 120)551,294 Net money from the sale in 10 years (Fu) is the difference between the selling price ($484,000) and the remaining balance of the loan Loan balance 396,000 (F/P 0.4375%, 120-2186 (F/A, 0 4375, 120) 396,000 (1 6885)-2186 (1573770) = $324,620 F 484,000-324,620-$159,380 Total future value of Plan A is: FA FIA Fa F 23,652 51,294 159,380 $234,326 2. Perform a similar analysis for the 15-year loan (plan B) and recommend to Marwan which plan he should select- He will decide to use the largest future worth after 10 years to select the best of the plans. Perform this analysis( for Plan A & Plan 8) if all estimates remain the same, except that when the office sells 10 years after purchase, the market is bad and the net selling price is only 70% of the purchase price, that is $308,000 3. 1. The 30 year fixed rate mortgage (plan A) is analyzed below, No taxes are considered on proceeds from the savings or investments. Plan A analysis-30-year fixed rate loan Amount of money required for closing costs Down Payment (10% of $440,000) Upfront fees (registration, survey, attorney) $ 44.000 $3,000 Total The amount of the loan is $396,000 and equivalent monthly principal and interest (P & determined at 525% /12 0.4375% per month for 30 (12) 360 months. As (396,000(A/P. 0.4375%, 3600 = 396,000(0005522)-$2186 Add the taxes and Insurance (T&I) of $500 for a total payment of: Payment A $ 2186+ 500 $2687 The future worth of Plan A is the sum of 3 future worth remainder of the $60,000 available after the closing costs, Fux), left over money from that available from monthly payments (Fax) and the increase in the house value when it is sold after 10 years (F F,.-(60,000-47,000)(F/P 0.5%, 120)-S23652 Money available each month to invest after the mortgage payment and the future worth after 10 years is 3000-2687 S313 F2A. 313 ( F/A 0.5%, 120)551,294 Net money from the sale in 10 years (Fu) is the difference between the selling price ($484,000) and the remaining balance of the loan Loan balance 396,000 (F/P 0.4375%, 120-2186 (F/A, 0 4375, 120) 396,000 (1 6885)-2186 (1573770) = $324,620 F 484,000-324,620-$159,380 Total future value of Plan A is: FA FIA Fa F 23,652 51,294 159,380 $234,326 2. Perform a similar analysis for the 15-year loan (plan B) and recommend to Marwan which plan he should select- He will decide to use the largest future worth after 10 years to select the best of the plans. Perform this analysis( for Plan A & Plan 8) if all estimates remain the same, except that when the office sells 10 years after purchase, the market is bad and the net selling price is only 70% of the purchase price, that is $308,000 3
