Emily Smith just received a promotion at work that increased her annual salary to $42,000. She...

Emily Smith just received a promotion at work that increased her annual salary to $42,000. She is eligible to participate in her employer’s 401(k) retirement plan to which the employer matches, dollar for dollar, workers’ contributions up to 5% of salary. However, Emily wants to buy a new $25,000 car in 3 years, and she wants to have enough money to make a $10,000 down payment on the car and finance the balance. Fortunately, she expects a sizable bonus this year that she hopes will cover that down payment in 3 years. A wedding is also in her plans. Emily and her boyfriend, Paul, have set a wedding date two years in the future, after he finishes medical school. In addition, Emily and Paul want to buy a home of their own in 5 years. This might be possible because two years later, Emily will be eligible to access a trust fund left to her as an inheritance by her late grandfather. Her trust fund has $80,000 invested at an interest rate of 5%.

Suppose that Emily and Paul purchase a $200,000 home in 5 years and make $40,000 down payment immediately. Find the monthly mortgage payment assuming that the remaining balance is financed at a 3% fixed rate for 15 years. What if its mortgage term is 30 years? 6.

What can you conclude about the relationship between the mortgage term and the amount of the monthly payment? From Question 5, is the monthly payment with the 30-year term half as large as the monthly payment with the 15-year term? Explain.

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Nancy received a job offer. The annual salary is $90,000. For simplicity, assume she gets paid...

Nancy received a job offer. The annual salary is $90,000. For simplicity, assume she gets paid once a year at the end of each year. The salary is expected to increase 5% per year. If she works at the company for 28 years and the appropriate discount rate is 9% what is the present value of this offer?

Scenario C: Angela just received her test paper back and she earned an A. She looked...

Scenario C: Angela just received her test paper back and she earned an A. She looked over at her classmate, Lucy, and noticed that Lucy had received a D on her test. 1. According to the Fundamental Attribution Error, how will Angela explain Lucy’s poor performance on her test? The Fundamental Attribution Error is described as “the tendency to overestimate the extent to which other people’s behavior is due to the internal, dispositional factors nand to underestimate the role of...

Linda received $90,000 in salary income for 2018. She has no dependents. Determine her income tax...

Linda received $90,000 in salary income for 2018. She has no dependents. Determine her income tax liability under each of the following independent situations: a. She files as a single individual. b. She is married and files a joint return with her spouse. Their only income is her $90,000 salary. c. She is married but files a separate

Amy works in a shop. Her annual gross salary is $25,000. From this, she must pay...

Amy works in a shop. Her annual gross salary is $25,000. From this, she must pay social security (calculated as 12% of her gross pay) plus 8% income tax. In addition to taxes, she must repay a loan to her employers at a rate of $125 per month, which comes out of her post tax income (i.e. income after tax has been calculated). What is Amy's take home pay per annum? Give your answer in dollars to the nearest dollar.

Amy just received her new homeowners insurance policy in the mail. When she looks at the...

Amy just received her new homeowners insurance policy in the mail. When she looks at the first section/page, what can she expect to see there? Please briefly describe the key items that would appear on such section/page.

Emma, a monthly salaried worker, received 1,300 cedis as her net salary; she heard that this year’s inflation is at 18%.

Emma, a monthly salaried worker, received 1,300 cedis as her net salary; she heard that this year’sinflation is at 18%. This situation caused prices to soar so high that she complained abouteverything she buys. In the previous year she was able to buy herself, dresses, a basket offoodstuffs, a small bag of oranges, a dozen of drinks and her transportation. However, this year,she couldn’t afford the full bag of oranges but half, and only 6 drinks after the other expenses....

Pat is 40, is single, and has no dependents. She received a salary of $390,000 in...

Pat is 40, is single, and has no dependents. She received a salary of $390,000 in 2018. She earned interest income of $11,000, dividend income of $15,000, gambling winnings of $14,000, and interest income from private activity bonds (issued in 2015) of $40,000. The dividends are not qualified dividends. The following additional information is relevant. Medical expenses (before 7.5%-of-AGI floor) $12,000 State income taxes 8,100 Real estate taxes 4,000 Mortgage interest on residence 13,100 Investment interest expense 3,800 Gambling losses...

Your friend, Diana Wood, recently completed the second year of her business and just received annual...

Your friend, Diana Wood, recently completed the second year of her business and just received annual financial statements from her accountant. Wood finds the income statement and balance sheet informative but does not understand the statement of cash flows. She says the first section is especially confusing because it contains a lot of additions and subtractions that do not make sense to her. Wood adds, “The income statement tells me the business is more profitable than last year and that's...

Jane Smith complained to her doctor that she was always tired and that she had bleeding...

Jane Smith complained to her doctor that she was always tired and that she had bleeding from her gums. Blood tests showed decreased platelet counts, increased atypical lymphocytes and presence of the Philadelphia chromosome. What disease is Jane Smith likely to have and what treatment should she get?

Mariana Pajón just hired your as her financial advisor. She has received two offers for cycling...

Mariana Pajón just hired your as her financial advisor. She has received two offers for cycling professionally and wants to select the best based only on money. Offer A is a $10m ($2m a year for 5 years). Offer B is $11m ($1m a year for four years and $7m in year 5). What is your advice? Use a 10% interest rate.

Subjects