Question
In: Finance
I and my husband Jatin have total amount of $150,000 in our savings account. We have...
I and my husband Jatin have total amount of $150,000 in our savings account. We have 3 school going kids. We want to buy a new home, a new car and keep funds for children higher education.
We finalized to buy a home for $760,000. We may use $120,000 of our savings as a down payment on it. For balance financing the mortgage specialist/agent gave us the following options:
- Option 1: a 25-year mortgage/loan, with semi-monthly payments (at the end of each period). The interest rate on the mortgage is 3.26% APR (annual percentage rate) compounded semi-annually.
Ques 1. What will the semi-monthly payment be on the Option 1 mortgage?
Please use (display + name) the excel function/ formula used for each yellow cell.
|
1. option 1 Mortgage loan |
|
|
annual rate |
3.26% |
|
period rate |
|
|
loan amount |
|
|
#periods |
|
|
semi-monthly payment: |
- Option 2: a monthly payment of $2,900 to be made at the end of each period. The interest rate with this option would be 3.60% APR (annual percentage rate) compounded semi-annually.
Ques 2. How many years will Option 2 mortgage be amortized over? Please use (display + name) the available excel function/ formula in each yellow cell .
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2. option 2 mortgage |
|
|
monthly payment |
-$2,900.00 |
|
A |
3.60% |
|
period rate |
|
|
loan |
|
|
Number of years needed to pay loan: |
Ques 3. To buy a new car of $45,000 (including taxes). In exchange of our old car for $10,000 and $10,000 from our savings as a down payment, the car dealer would provide the $25,000 balance as a 5-year loan paid semi-monthly at 4.8% ANNUAL RATE compounded semi-monthly. What will the payment be on the loan for the car as per below information? Please use (display + name) the excel function/ formula used for each yellow cell.
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Answer 3. car loan |
|
|
ANNUAL RATE |
4.80% |
|
period rate |
|
|
loan |
|
|
#periods |
|
|
semi-monthly payment |
Solutions
Expert Solution
| 1 | Option1 Mortgage Loan | |||||||||||
| Annual Rate | 3.26% | |||||||||||
| Semi annual rate =(3.26/2) | 1.630% | |||||||||||
| Period Rate (Semi monthly)=r | ||||||||||||
| Number of periods in 6 months | 12 | (6*2) | ||||||||||
| (1+r)^12=(1+0.0163) | ||||||||||||
| 1+r=1.0163^(1/12)= | 1.00134829 | |||||||||||
| Period Rate (Semi monthly)=r= | 0.00134829 | |||||||||||
| Rate | Period Rate (Semi monthly)=r= | 0.1348% | ||||||||||
| Nper | Number of Periods of Mortgage | 600 | (25*12*2) | |||||||||
| Pv | Loan Amount | $640,000 | (760000-120000) | |||||||||
| PMT | Semi -Monthly Payment | $1,556.35 | (Using PMT function of excel with Rate=0.1348%,Nper=600,Pv=-640000) | |||||||||
| 2 | Option2 Mortgage | |||||||||||
| Pmt | Monthly Payment | ($2,900) | ||||||||||
| Annual Rate | 3.60% | |||||||||||
| Rate | Period (Monthly ) Rate=3.6/12= | 0.3% | ||||||||||
| Pv | Loan amount | $640,000 | ||||||||||
| NPER | Number of Months to Pay | 362.180001 | (Using NPER function of excel with Rate=0.3%,Pmt=-2900,Pv=640000) | |||||||||
| NPER/12 | Number of Years to Pay Loan | 30.1816667 | ||||||||||
| 3 | Car Loan | |||||||||||
| ANNUAL RATE | 4.80% | |||||||||||
| Rate | Period Rate (Semi monthly)=4.8/24 | 0.2% | ||||||||||
| Nper | Number of Periods =5Year*12*2 | 120 | ||||||||||
| Pv | Loan Amount | $25,000 | ||||||||||
| PMT | Semi -monthly payment | $234.54 | (Using PMT function of excel with Rate=0.2%,Nper=120,Pv=-25000) | |||||||||
   |
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