Chapter 7 HW Lucinda Lacy Lucinda Lacy purchased a house today for $110,000 by making a down payment of $15,000 and paying closing costs of: 1.2% of purchase price $350 . . 300 . Loan origination fee Appraisal fee Survey fee Attorney fee Processing fee Escrow fee Other misc. costs 400 450 300 750 . Lucinda has a 15-year loan with an interest rate of 6.5% APR, compounded monthly. Her taxes and insurance are $392 per month. Lucinda has an estimate for a $16,000 firm, fixed price contract to remodel the house and this expense will be qually distributed over the period of her ownership. After remodeling, she estimates that she could sell the house for $150,000. Her selling expenses would be 6.5% sales commission plus $1,500. Manual Assignment 1. Determine manually (hand-written not excel), by trial and error, Lucinda's rate of return, if she owns the house for 6 months. Show the manual calculations, including the ball-park method with appropriate cash flow diagrams. Note: To get full credit, you must show ALL handwritten manual calculations (including the value of the factors) of how you got the ROR in #1. (10 Points) 1. Calculate the monthly mortgage payment. 2. Determine the value of the mortgage loan payoff after 6 months. 3. Determine the total amount of money Lucinda invested on the first day. 4. Compute her total monthly expenses during the period that she owned the house. 5. Calculate her return - how much money did she get after she paid off the bank and commission. 6. Draw the final CF Diagram that you will use to determine the ROR. 7. Use the Ballpark (trial and error method in the text) to solve for i* Chapter 7 HW Lucinda Lacy Lucinda Lacy purchased a house today for $110,000 by making a down payment of $15,000 and paying closing costs of: 1.2% of purchase price $350 . . 300 . Loan origination fee Appraisal fee Survey fee Attorney fee Processing fee Escrow fee Other misc. costs 400 450 300 750 . Lucinda has a 15-year loan with an interest rate of 6.5% APR, compounded monthly. Her taxes and insurance are $392 per month. Lucinda has an estimate for a $16,000 firm, fixed price contract to remodel the house and this expense will be qually distributed over the period of her ownership. After remodeling, she estimates that she could sell the house for $150,000. Her selling expenses would be 6.5% sales commission plus $1,500. Manual Assignment 1. Determine manually (hand-written not excel), by trial and error, Lucinda's rate of return, if she owns the house for 6 months. Show the manual calculations, including the ball-park method with appropriate cash flow diagrams. Note: To get full credit, you must show ALL handwritten manual calculations (including the value of the factors) of how you got the ROR in #1. (10 Points) 1. Calculate the monthly mortgage payment. 2. Determine the value of the mortgage loan payoff after 6 months. 3. Determine the total amount of money Lucinda invested on the first day. 4. Compute her total monthly expenses during the period that she owned the house. 5. Calculate her return - how much money did she get after she paid off the bank and commission. 6. Draw the final CF Diagram that you will use to determine the ROR. 7. Use the Ballpark (trial and error method in the text) to solve for i*
