Q

$)$

$$You can afford to pay up to $

$4000$

$$in mortgage payments every month for housing

and have $

$80$

$,$

$000$

$$in savings

$($

you don't anticipate and increase in income

$/$

savings

$)$

$.$

Which of the following mortgages would allow you to buy the most expensive

property?

A

$30$

$$year fully amortizing FRM with

$8\mathrm{.}2$

$\%$

$$contract interest rate and

$\mathrm{.}85$

$$LTV

$[$

a

$]$

A

$25$

$$year FRM with

$6\mathrm{.}5$

$\%$

$$contract interest rate and

$\mathrm{.}9$

$$LTV

$.$

$[$

b

$]$

A

$30$

$$year FRM with

$8\mathrm{.}2$

$\%$

$$contract interest rate,

$\mathrm{.}9$

$$LTV and a balloon payment of

$

$80$

$,$

$000$

$$at the end of the

$5$

$$th year

C

A

$30$

$$year mortgage with an interest only period of

$5$

$$years at a fixed contract rate

$8$

$\%$

$$and

$0\mathrm{.}95$

$$LTV

$.$

$[$

d

$]$