Question
You are considering the purchase of a new home. You intend to borrow $275,000. You are discussing financing options with a mortgage broker. The mortgage
You are considering the purchase of a new home. You intend to borrow $275,000. You are discussing financing options with a mortgage broker. The mortgage broker tells you that you may take a 30-year loan, with monthly payments, at an interest rate of 2.75%/annum. Alternately, you may take a 15-year loan, also with monthly payments, at an interest rate of 2.0%/annum. The first payment on ether loan will be due one month from the closing date of the loan.
What is the monthly loan payment on the 30-year loan?
What is the monthly loan payment on the 15-year loan?
What is the Effective Annual Interest Rate of the-30 year loan?
Assume that you will live in the house for the entire term of the 30-year loan and make all payments on time, how much interest would you save by financing the house over 15 years as compared to financing it over 30 years?
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ANSWER a To calculate the monthly payment on the 30year loan we can use the formula for the present value of an annuity PV PMT x 1 1 r12n x 12 r12 Whe...
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Accounting Tools for business decision making
Authors: kimmel, weygandt, kieso
4th Edition
978-0470117262, 9780470534786, 470117265, 470534788, 978-0470095461
