Question
28. Mortgage Market (10 points) You plan to purchase a house using a 30-year fixed rate mortgage loan from your local bank. The mortgage loan
28. Mortgage Market (10 points)
You plan to purchase a house using a 30-year fixed rate mortgage loan from your local bank. The mortgage loan amount is $200,000 and the bank offers you two options for the payment:
Option (1) Mortgage Loan rate of 8% (APR) with monthly payments and monthly compounding and zero points.
- What is the monthly mortgage payment?
Option (2) Mortgage Loan rate of 7.75% (APR) with monthly payments and monthly compounding but with 2 points.
- What is the present value of the 2 points?
- What is the monthly mortgage payment (effectively) by taking into account (amortizing) the 2 points assuming that you live in the house for 30 years?
d)Which is the better option?
SHOW: All calculations or calculator/Excel inputs on the exam.
- monthly mortgage payment
- present value of 2 points
- monthly mortgage payment with amortized points
- better option
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Essentials Of Investments
Authors: Zvi Bodie, Alex Kane, Alan J. Marcus
8th Edition
0077606779, 978-0697789945
