Julie wishes to begin making monthly deposits into a savings account which earns 5% interest annually. If she intends to have saved $8,500 by the end of 3 years, how much must she deposit each month?

$219

$236

$474

$225

Suppose an investor buys a property today for $70,000. If it increases in value by 10% each year, what will it be worth at the end of three years?

$77,000

$84,700

$93,170

none of the above

Suppose an investor expects to sell a property two years from now for $84,700. If the investor requires a 10% rate of return, how much is that property worth to the investor today?

$70,000

$77,000

$84,700

$93,170

You are buying a $62,000 house and the bank requires a 10% down payment, with the rest financed at 11 3/4% for 30 years with fixed monthly payments. What is your monthly loan payment?

$551.62

$577.42

$563.25

$574.52

Use the information from the previous problem. At the end of 4 years, you sell the house. How much do you owe on the loan?

$53,641

$54,772

$54,180

$55,868

John Jones is buying a house for $100,000. John can get a loan for 95% of the purchase price at 8% with monthly payments for a 25-year term. What would his payments be if he borrows under these terms?

$620.67

$771.81

$733.23

$718.56

You have made 60 monthly payments of $500 at 8.5% annual interest. You have 300 payments left on the loan. If you sell the house and must pay off this loan, how much do you owe the lender?

$18,000

$62,094

$24,371

$65,027

A buyer can afford no more than $500 per month in payments. The most favorable loan available in the market is a 30 year loan at 10%. What is the maximum affordable house with a 10% down payment?

$55,000

$63,306

$59,975

$69,636

A lender makes a $90,000 mortgage at 9% interest with monthly payments for 25 years. How much principal will be repaid during the fourth year of the loan?

$7,749

$1,314

$1,376

$7,787

A real estate investment is expected to return to its owner $3,500 per year for 16 years after expenses. At the end of year 16, the property is expected to be sold for $49,000. Assuming the required rate of return is 14% for investments with this degree of risk, what is the present value of the cash flows?

($51)

$27,949

($90)

$27,210

Information for the next two questions:

Consider an adjustable rate mortgage of $90,000 with a maturity of 30 years and monthly payments. At the end of each year, the interest rate is adjusted to become two percentage points above the index. There is an annual cap of 300 basis points (3%), and a lifetime cap of 500 basis points (5%). In the first year the contract rate is 7%, with no teaser. In year two, the index rate is 9%.

What is the contract rate in year two?

8%

10%

9%

11%

What monthly payment is called for in year two?

$786

$795

$599

$648

If the initial contract rate on an ARM is 6%, the second year contract rate is 9%, the margin is 2%, the life of the loan cap is 5%, and the annual cap is 3%, what is the contract rate for year three if the index is 9%?

13%

12%

8%

11%

Consider the following information for the next two questions regarding an ARM loan:

The index for year one is 6%, the margin is 2%, the lifetime cap is 6%, the annual cap is 2%, and the first-year-only teaser is 1%.

What is the first year contract rate?

6%

7%

8%

12%

The maximum interest rate allowable during the life of the mortgage is

12%.

13%.

14%.

There is no maximum

A borrower is offered a mortgage loan for $100,000 with an interest rate of 10% and a 30-year amortization period with monthly payments. The lender charges three points at origination. What is the effective interest rate?

10%

9%

10.37%

10.24%

You are buying a $162,000 house with a 20% down payment and a fixed-rate mortgage for the remainder at 8.75% for 30 years with monthly payments. What is the balance or amount outstanding on the loan at the end of the fourth year?

$125,333.08

$156,666.35

$125,061.51

$156,326.89

You are buying a $162,000 house with a 20% down payment and a fixed-rate mortgage for the remainder at 8.75% for 30 years with monthly payments. How much total interest is due over the full term of the loan?

$367,042.94

$340,200.00

$237,442.94

$129,600.00

Bob is considering fixed-rate loans from two different lenders who are willing to finance the purchase of a home. The loan amount is $90,000. Lender A is offering a 30-year, monthly payment loan at 7% interest with 2.5 points. Lender B is offering a 30-year, monthly payment loan at 7.5% interest with no points. Which of the following bits of advice would be best for Bob assuming he does not plan to prepay either loan? (Hint: find the effective interest rate on each loan and compare.)

Loan A is better.

Loan B is better.

Both loans are equally desirable

Points do not affect the loan choice, so toss a coin and pick one.

You are buying a $162,000 house with a 20% down payment and a fixed-rate mortgage for the remainder at 8.75% for 30 years with monthly payments. How much interest is paid over the course of the first 12 months?

$1,139.88

$902.06

$1,142.36

$913.89