Question

In: Economics

1. (10 pts) You just bought a house for $400,000. You put 20% down and financed...

1. (10 pts) You just bought a house for $400,000. You put 20% down and financed the rest over 30 years at 6% nominal interest. Assuming equal monthly payments over the term of the loan, what are the monthly payments? What is the effective rate? (Chapter 4)

2. (10 pts) What would you need to invest today in an account that had a nominal rate of 8% compounded quarterly, if you wanted $12,000 in 4 years? What would be the investment required if the account compounded semi-annually? What is the effective rate of each investment? (Chapter 3)

3.

  1. (10 pts) Assume the following cash flows: (Chapter 4)

Assuming an 9% interest rate, what is the value of A required to make the present value of the cash flows equal to 0?

Solutions

Expert Solution

1. Price of house = $ 400,000

Down payment = 20%

Loan amount = 0.8 × $400,000 = $ 320,000

Interest rate = 6% compounded monthly

Effective monthly rate = 6/12 = 0.5% per month

Monthly installment = $ A

Monthly installment = $ 1,918.56

2. Let us assume we invest an amount = $ A

Interest rate = 8% compounded quarterly

Time = 4 years

FV = $ 12,000

Effective interest rate

Effective rate of interest = 8.2432% per year

So you are required to deposit $ 8,741.35 today.

Question number 3 i cannot solve because the cash flow diagram is missing.

Please contact if shaving any query will be bologe to you for your generous support. Your help mean a lot to me, please help. Thank you.


Related Solutions

In August 2004, Bonnie Martin bought a house for $391,000. She put 20% down and financed...
In August 2004, Bonnie Martin bought a house for $391,000. She put 20% down and financed the rest with a thirty-year loan at the then-current rate of 5 3 4 %. In 2007, the real estate market crashed. In June 2009, she had to sell her house. The best she could get was $235,000. Was this enough to pay off the loan?I got no. If so, how much did she profit? If not, how much did she have to pay...
1. You just bought a house for $300,000. You put $100,000 as a down payment and...
1. You just bought a house for $300,000. You put $100,000 as a down payment and borrow the remaining $200,000 from a bank. You take out a 30-year mortgage that charges you 6 percent APR but with monthly compounding. a. How much is your monthly mortgage payment? Show your work. b. How much of your second mortgage payment goes towards interest? Show your work.
You bought a house for $150,000 and put down 10% and got a mortgage at an...
You bought a house for $150,000 and put down 10% and got a mortgage at an interest rate of 4.35 % per year. You would pay it back by paying an equal amount at the end of each month for 15 years? (Show all work) How much is your loan amount? How much is your monthly loan payment? How much is your loan balance after 2 years? How much is your total interest payment by the end of year 3?
You just purchased a $400,000 house and gave a 20% down payment. For the remaining portion,...
You just purchased a $400,000 house and gave a 20% down payment. For the remaining portion, you obtained a 30-year mortgage at a 6% interest rate. (6 points) What are the monthly payments on this mortgage? If the house appreciates at a 3 percent annually, what will be the value of the house in ten years? In ten years, how much equity will you have on this home? Answer all questions and show work in Excel. SHOW ME IN EXCEL...
Ella purchases a new house for $400,000. She put 20% down and will finance the rest...
Ella purchases a new house for $400,000. She put 20% down and will finance the rest over 30 years at 4.5%. What is her monthly payment? Group of answer choices $1,721.35. $1,621.4 $405.34 $1,635.98.
You bought a $225,000 house with a $40,000 down payment and financed the remaining $185,000 with...
You bought a $225,000 house with a $40,000 down payment and financed the remaining $185,000 with a 30-year mortgage (home loan). The interest rate on the loan is 5%. a) Find the monthly payment. b) After 12 years of paying on this mortgage, you decide to explore refinancing. With 18 years left to go, what is your remaining loan balance? c) If you do refinance the amount from part (b) with a new 15-year loan at 3% interest, how much...
1. If you just bought a house for $400,000 (including on closing costs) on Signal Mountain...
1. If you just bought a house for $400,000 (including on closing costs) on Signal Mountain by getting a fixed 30-year mortgage at a 5% interest rate, what would be your monthly payment? 2. How much less money would you pay if you refinanced the loan in the previous problem after 15 years for a new 15-year loan at 3.5% interest rate? Be sure to include a $2,000 refinancing cost to the total remaining balance on the new loan
​You just bought a house for $300,000. You put $100,000 as a down payment and borrow the remaining $200,000 from a bank.
You just bought a house for $300,000. You put $100,000 as a down payment and borrow the remaining $200,000 from a bank. You take out a 30-year mortgage that charges you 6 percent APR but with monthly compounding.              A. (15 points) How much is your monthly mortgage payment? Show your work.              B. (5 points) How much of your second mortgage payment goes towards interest? Show your work.
Shirley Trembley bought a house for $187,600. She put 20% down and obtained a mortgage loan...
Shirley Trembley bought a house for $187,600. She put 20% down and obtained a mortgage loan for the balance at 6 3/8% for 30 years. a. Find the monthly payment. b. Find the total interest paid Please show your work
You are planning to buy a house in New Jersey. You put a 20% down payment,...
You are planning to buy a house in New Jersey. You put a 20% down payment, and 15-year mortgage rates are at 4.2% -Price of the house is $400,000. a. Calculate the monthly payments. b- Calculate the 1st month interest payment. c-Calculate the 1st month principal payments
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT