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When obtaining a mortgage, one choice you make is whether to pay points in exchange for a lower interest rate. This homework asks you to
When obtaining a mortgage, one choice you make is whether to pay points in exchange for a lower interest rate. This homework asks you to work through the math to decide whether to do so Scenario Details: Amount of mortgage: $ Other closing costs: $ Length of mortgage: years Mortgage interest compounds monthly, and payments are monthly Expected duration of residence: years Mortgage Options: Mortgage A Interest rate: Points: Mortgage B Interest rate: Points: Further instructions: Round all answers to two decimal places. Pay attention to negative signs. Do not include dollar signs $QUESTION The remaining questions explore how the answers change if you repay the mortgage after just one year. Using a discount rate of what is the present value of the cash flows associated with Mortgage A if paid off after one year? QUESTION Using a discount rate of what is the present value of the cash flows associated with Mortgage B if paid off after one year? QUESTION Which mortgage is the better choice if you pay the mortgage off after one year? Mortgage A Mortgage B They are the same There is no way to tell
When obtaining a mortgage, one choice you make is whether to pay points in exchange for a lower interest rate. This homework asks you to work through the math to decide whether to do so
Scenario Details:
Amount of mortgage: $
Other closing costs: $
Length of mortgage: years
Mortgage interest compounds monthly, and payments are monthly
Expected duration of residence: years
Mortgage Options:
Mortgage A
Interest rate:
Points:
Mortgage B
Interest rate:
Points:
Further instructions:
Round all answers to two decimal places.
Pay attention to negative signs.
Do not include dollar signs $QUESTION
The remaining questions explore how the answers change if you repay the mortgage after just one year.
Using a discount rate of what is the present value of the cash flows associated with Mortgage A if paid off after one year?
QUESTION
Using a discount rate of what is the present value of the cash flows associated with Mortgage B if paid off after one year?
QUESTION
Which mortgage is the better choice if you pay the mortgage off after one year?
Mortgage A
Mortgage B
They are the same
There is no way to tell
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