2. Financing decisions [4 questions Joe King has an annual income of $240,000. Joe is buying a $400,000 house in a very desirable area, sought after by buyers. He applies for a loan at the bank and is approved for fully amortizing 30-year FRM at an annual rate of 3.40%, with monthly payments, compounded monthly. The bank will not lend more than 80% LTV. The appraisal indicates the house is worth $375,000. a) Assuming he does not want PMI (1) What is the biggest mortgage Joe can get and (2) What will his down payment be? b) What will his monthly payment be? Joe decides to shop around more and finds option #2 - a bank willing to give him a 30 year, 90% LTV mortgage based upon the $375,000 appraised value at an interest rate of 3.65%. c) What is the additional amount he can borrow and what will his down payment be for this option? d) What is the effective interest rate for the additional amount borrowed under option #2