Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Mortgages, loans taken to purchase a property, involve regular payments at fxed intervals and are treated as reverse annulties. Mortgages are the reverse of annuities,

image text in transcribed
Mortgages, loans taken to purchase a property, involve regular payments at fxed intervals and are treated as reverse annulties. Mortgages are the reverse of annuities, because you get a lump-sum amount as a loan in the beginnlng, and then you make monthly payments to the lender. You ve decided to buy a house that is valued at 51 million. You have $100,000 to use as a down payment on the house, and want to take out a mortgage for the remainder of the purchase price. Your bank has approved your $900,000 mortgage, and is offering a standard 30 -year mortgage at a 12\% fixed nominal interest rate (called the loan's annual percentage rate or APR). Under this ioan proposal, your mortgage payment will be per month. (Note: Round the final value of any interest rate used to four decimal places.). Yout friends suggest that you take a 15-year mertgoge, because a 30-year mortgage is too long and you will pay a lot of money on interest. If your bonk approves a 15-yeat, $900,000 loan at a fixed nominal interest rate of 12% (APR), then the difference in the monthly payment of the 15 -year. fnortgage and 30 year mortgage will be (Note: Round the final yalue of any interest rate used to four decimal places.) It is ilwely that you wen' twe the prospect of paying more money each month, but if you do take out a 15-year mortgage, you will make far fewer. bayments and will pay a lot less in interest. How much more total interest will you pay over the afe of the foan if you fake out a Jo-year mortgage instead of a 15 year mortgage? 51,631,349,5251,277,192,7051,916,035.8851,386,431,60 Wrich of the following statements is not thue about mortgages? Mertgages al wilys hove a fxed nominal interess rate. The ending thalasice of an amortized ioan contract will be zero: Mortoapes are examples of umortited loans

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Chains Of Finance How Investment Management Is Shaped

Authors: Diane-Laure Arjalies, Philip Grant, Iain Hardie, Donald MacKenzie, Ekaterina Svetlova

1st Edition

0198802943, 978-0198802945

More Books

Students also viewed these Finance questions

Question

What is job rotation ?

Answered: 1 week ago

Question

2. How should this be dealt with by the organisation?

Answered: 1 week ago

Question

explain what is meant by the term fair dismissal

Answered: 1 week ago