Questions 1 2 3 4 A few years out of UCCS and you're earning a salary...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Questions 1 2 3 4 A few years out of UCCS and you're earning a salary of $125,000 and decide to buy your first condominium (a condominium, or condo, is just an apartment that you own). The condo will cost $300,000. The bank requires a 15% down payment, and will lend you the difference in a 4.80% (M) traditional 30yr mortgage. Your First Home: Chapter One (day one) 5 What is the value of your home equity the day you buy the condo? What is your monthly payment? What is the total amount of interest you will pay in the first year (i.e. months 1-12)? What is your taxable income at the end of the first year, for computing your tax liability (remember: mortgage interest is tax-deductible, so your taxable income is salary minus total interest paid for the year)? If your effective tax rate is 25%, how much are you saving in taxes this first year (compared to not having tax- deductible interest)? $45,000 $1,337.90 $12,154.95 $112,846 $3,038.5 Your First Home: Chapter Two (end of year three) For three years from the day you bought the condo, Colorado real estate continues to climb. Your condo appreciates 4% every year for three years. And, interest rates fall to 3.60%(M). You decide to refinance your mortgage. You can refinance into a new mortgage for (again) 85% of the value of the condo. Questions 6 7 8 9 10 11 What is the value of your condo at the end of year three? Before you refinance, what is the principal balance you owe on the mortgage at the end of year three (i.e. month 36)? What is the new loan amount (i.e. new principal balance) for the new mortgage? What is the new monthly payment you'll be making on the new mortgage? What is the total amount of interest you will pay in the first year (i.e. months 1-12 on new mtge)? You paid off the original mortgage principal balance, taking out a new mortgage with a higher principal balance, how cash did you receive after paying off the original mortgage? 3 Your First Home: Chapter Three (end of year ten) Now seven more years have passed, a total of ten years since you bought the condo. The real estate market slowed down and then it crashed. For the next 6 years, your condo appreciated at 1% per year, but then over-building finally caught up with Colorado and in year 10 the housing market fell 20%. You pay a broker a 5% commission to sell the condo. You also have closing costs of $2,500. Questions 12 13 14 15 What is the value (sale price) of your condo at the end of year ten? Hint: it's worth less than you paid for it. Inclusive of the realtor commission and closing costs, what cash do you receive upon sale? What is the principal balance you owe on the mortgage at the end of year ten? (Hint: be careful here... It's 10 years since you bought the condo, but you refinanced to a new mtge at the end of year three... so be careful: how many months have passed on this new mortgage?) You sell the condo, receive cash (question 13) and pay off the mortgage (question 14). How much cash do you have left after the sale? Questions 16 Your First Home: Chapter Four (still end of year ten) Now, you wonder, how good of an investment was this condo over these ten years? 17 18 19 20 Assume that at the end of year three when you refinanced your mortgage, and you received cash then, you put that extra cash in a savings account earning 3.00% (A). What is the total amount of cash you have now, in year 10 (i.e. 7 years later), from that deposit? When you sold the condo at the end of year 10, you received cash after paying off the loan, what was the value of that cash (question 15)? What is the total amount of cash in your hands at the end of year ten (i.e. sum of the answers to questions 16 & 17). When you bought the condo ten years ago, you had to pay a down payment, how much was the original down payment? You made an initial cash outflow (the down payment, question 19) and ten years later had cash in the bank (total cash, question 18). Your initial investment is PV, the final cash back is FV, and 10 years passed. What was the % return each year? Using TVM, solve for annual I (to three decimal places). 5 Questions 1 2 3 4 A few years out of UCCS and you're earning a salary of $125,000 and decide to buy your first condominium (a condominium, or condo, is just an apartment that you own). The condo will cost $300,000. The bank requires a 15% down payment, and will lend you the difference in a 4.80% (M) traditional 30yr mortgage. Your First Home: Chapter One (day one) 5 What is the value of your home equity the day you buy the condo? What is your monthly payment? What is the total amount of interest you will pay in the first year (i.e. months 1-12)? What is your taxable income at the end of the first year, for computing your tax liability (remember: mortgage interest is tax-deductible, so your taxable income is salary minus total interest paid for the year)? If your effective tax rate is 25%, how much are you saving in taxes this first year (compared to not having tax- deductible interest)? $45,000 $1,337.90 $12,154.95 $112,846 $3,038.5 Your First Home: Chapter Two (end of year three) For three years from the day you bought the condo, Colorado real estate continues to climb. Your condo appreciates 4% every year for three years. And, interest rates fall to 3.60%(M). You decide to refinance your mortgage. You can refinance into a new mortgage for (again) 85% of the value of the condo. Questions 6 7 8 9 10 11 What is the value of your condo at the end of year three? Before you refinance, what is the principal balance you owe on the mortgage at the end of year three (i.e. month 36)? What is the new loan amount (i.e. new principal balance) for the new mortgage? What is the new monthly payment you'll be making on the new mortgage? What is the total amount of interest you will pay in the first year (i.e. months 1-12 on new mtge)? You paid off the original mortgage principal balance, taking out a new mortgage with a higher principal balance, how cash did you receive after paying off the original mortgage? 3 Your First Home: Chapter Three (end of year ten) Now seven more years have passed, a total of ten years since you bought the condo. The real estate market slowed down and then it crashed. For the next 6 years, your condo appreciated at 1% per year, but then over-building finally caught up with Colorado and in year 10 the housing market fell 20%. You pay a broker a 5% commission to sell the condo. You also have closing costs of $2,500. Questions 12 13 14 15 What is the value (sale price) of your condo at the end of year ten? Hint: it's worth less than you paid for it. Inclusive of the realtor commission and closing costs, what cash do you receive upon sale? What is the principal balance you owe on the mortgage at the end of year ten? (Hint: be careful here... It's 10 years since you bought the condo, but you refinanced to a new mtge at the end of year three... so be careful: how many months have passed on this new mortgage?) You sell the condo, receive cash (question 13) and pay off the mortgage (question 14). How much cash do you have left after the sale? Questions 16 Your First Home: Chapter Four (still end of year ten) Now, you wonder, how good of an investment was this condo over these ten years? 17 18 19 20 Assume that at the end of year three when you refinanced your mortgage, and you received cash then, you put that extra cash in a savings account earning 3.00% (A). What is the total amount of cash you have now, in year 10 (i.e. 7 years later), from that deposit? When you sold the condo at the end of year 10, you received cash after paying off the loan, what was the value of that cash (question 15)? What is the total amount of cash in your hands at the end of year ten (i.e. sum of the answers to questions 16 & 17). When you bought the condo ten years ago, you had to pay a down payment, how much was the original down payment? You made an initial cash outflow (the down payment, question 19) and ten years later had cash in the bank (total cash, question 18). Your initial investment is PV, the final cash back is FV, and 10 years passed. What was the % return each year? Using TVM, solve for annual I (to three decimal places). 5
Expert Answer:
Answer rating: 100% (QA)
15 downpayment 300000 15 45000 Therefore a loan of 255000 was taken initially The val... View the full answer
Related Book For
Quantitative Methods for Business
ISBN: 978-0840062345
12th edition
Authors: David Anderson, Dennis Sweeney, Thomas Williams, Jeffrey Cam
Posted Date:
Students also viewed these general management questions
-
A real estate investor is interested in purchasing condominium property in Naples, Florida. The three most preferred condominiums are listed along with criteria weights and rating information. Which...
-
Condo King (CK) is building a luxury condominium for a contract price of $60,000,000. This is estimated to be a three-year project with an estimated cost of $48,000,000. CK uses the...
-
A few years ago, a construction manager earning $70,000 per year working for a regional home builder decided to open his own home building company. He took $100,000 out of one of his investment...
-
A double-ended queue or deque (pronounced "deck") is a collection that is a combination of a stack and a queue. Write a class Deque that uses a linked list to implement the following API: public...
-
Suppose the market for gourmet chocolate is in long-run equilibrium, and an economic downturn has reduced consumer discretionary incomes. Assume chocolate is a normal good, and the chocolate...
-
For the following exercises, use the Intermediate Value Theorem to confirm that the given polynomial has at least one zero within the given interval. f(x) = x 3 100x + 2, between x = 0.01 and x = 0.1
-
Demonstrate the density property of rational numbers by finding a rational number between \(\frac{27}{13}\) and \(\frac{21}{10}\).
-
Maritime Insurance Company offers insurance policies for recreational boats. A typical policy will pay the replacement cost of $25,000 if the boat is a total loss. If the boat is not a total loss but...
-
Question 4 (a) Mr Hiroko, a Japanese national, came to Malaysia to set up an Information Techno He had been informed by his employer, a Malaysian company, that his tax would be source from his...
-
Jennifer Carter graduated from State University in June 2005, and, after considering several job offers, decided to do what she always planned to do go into business with her father, Jack Carter....
-
You are an HR Director who is beginning the process of hiring a new employee for a newly created job. A job analysis has been completed and the best candidate is someone who already has previous...
-
The controller for Rainbow Children's Hospital, located in Munich, Germany, estimates that the hospital uses 27 kilowatt-hours of electricity per patient-day, and that the electric rate will be 0.15...
-
Gerber Ltd . buys 2 , 0 0 0 of the 1 0 0 , 0 0 0 shares of Efron Inc., paying $ 3 5 . 0 0 per share. Suppose Efron distributes a 1 0 percent share dividend. Later the same year, Gerber Ltd . sells...
-
A small object, which has a charge q = 8.0 C and mass m = 3.4 x 105 kg, is placed in a constant electric field. Starting from rest, the object accelerates to a speed of 3.8 x 103 m/s in a time of 1.2...
-
Concord Inc. sells two product lines. The sales mix of the product lines is: Standard, 80%; and Deluxe, 20%. The contribution margin ratio of each line is: Standard, 20%; and Deluxe, 25%. Concord's...
-
A skateboarder is attempting to make a circular arc of radius r = 19m in a parking lot. The total mass of the skateboard and skateboarder is m = 81kg. The coefficient of static friction between the...
-
Toy Ltd has the following land and buildings in its accounts as at 30 June 2022: Land in Wellington, at cost Land in Auckland, at valuation 2019 Buildings on land in Auckland, at valuation 2019 $'000...
-
On January 1, 2018, Khalid Ltd., which follows IAS 17, entered into an eight-year lease agreement for three dryers. Annual lease payments for the equipment are $28,500 at the beginning of each lease...
-
Open the workbook OM455. Save the file under a new name, OM455COUNTIF.xls. Suppose we wish to automatically count the number of each letter grade. a. Begin by putting the letters A, B, C, D, and F in...
-
A random variable x is uniformly distributed between 1.0 and 1.5. a. Show the graph of the probability density function. b. Find P(x = 1.25). c. Find P(1.0 x 1.25). d. Find P(1.20 < x < 1.5).
-
The following examples are experiments and their associated random variables. In each case identify the values the random variable can assume and state whether the random variable is discrete or...
-
\(\frac{231}{490}\) Reduce the fraction to lowest terms.
-
\(\frac{750}{17,875}\) Reduce the fraction to lowest terms.
-
Convert \(\frac{25}{6}\) to a mixed number. Do the indicated conversion. If it is a repeating decimal, use the correct notation.
Study smarter with the SolutionInn App