In: Finance
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Use your calculator to determine? (1) the current mortgage payment? (2) the total interest? paid, (3) the payment after the first adjustment and? (4) the maximum payment for each of the following ?$167,600?, ?30-year mortgages. Assume that the initial interest rate is 7.20 percent.
a. Annually? adjustable, 1 percent per? year, 5 percent lifetime cap. Assume also that rates increase at least 1 percent per year until they reach the lifetime cap and rates never again drop below the lifetime cap for the term of the mortgage.
b. Fixed for 3 years and then annually? adjustable, 2 percent per? year, 5 percent lifetime cap. Assume also that rates increase at least 2 percent per year until they reach the lifetime cap and rates never again drop below the lifetime cap for the term of the mortgage.
c. Fixed for 5 years then annually? adjustable, 2 percent per? year, 6 percent lifetime cap. Assume also that rates increase at least 2 percent per year until they reach the lifetime cap and rates never again drop below the lifetime cap for the term of the mortgage.
d. Fixed for 5 years and then adjustable every 5? years, 3 percent per? period, 6 percent lifetime cap. Assume also that rates increase at least 3 percent per year until they reach the lifetime cap and rates never again drop below the lifetime cap for the term of the mortgage.
Please answer the following questions for A, B, C and D
The current mortgage payment is ?$ ?(Round to the nearest? cent.)
The payment after the first adjustment is ?$ ?(Round to the nearest? cent.)
The maximum payment is ?$ ?(Round to the nearest? cent.)
The total interest paid for a ?$168,000 ?30-year mortgage is ?$ . ?(Round to the nearest? cent.
2)a)
2)a) | ||||||
Year | 0 | 1 | 2 | 3 | 4 | 5 |
Principal outstanding | 167,600.00 | n(for prior period)=12, I/Y=7.20%/12, PV=167,600, PMT=-1,137.65, CPT-->FV=165,962.06 | n(for prior period)=12, I/Y=8.20%/12, PV=165,962.06, PMT=1,251.03, CPT-->FV=165,504.60 | n(for prior period)=12, I/Y=9.20%/12, PV=165,504.60, PMT=1,366.16, CPT-->FV=163,190.58 | n(for prior period)=12, I/Y=10.20%/12, PV=163,190.58, PMT=1,482.63, CPT-->FV=161,989.36 | n(for prior period)=12, I/Y=11.20%/12, PV=161,989.36, PMT=1,600.07, CPT-->FV=160,875.23 |
Initial interest rate (I/Y) | 7.20% | 7.2%+1.0% = 8.2% | 8.2%+1.0% = 9.2% | 9.2%+1.0% = 10.2% | 10.2%+1.0% = 11.2% | 11.2%+1.0% = 12.2% |
Number of payments made during the period before next reset (n) | 12.00 | 12.00 | 12.00 | 12.00 | 12.00 | 300.00 |
Period remaining (months) (N) | =30*12=360 | 360-12=348 | 348-12=336 | 336-12=324 | 324-12=312 | 312-12=300 |
Monthly payments (PMT) | N=360, I/Y=7.20%/12, PV=167600,FV=0, CPT-->PMT=1,137.65 | N=348, I/Y=8.20%/12,
PV=165,962.06,FV=0, CPT-->PMT=1,251.03 |
N=336, I/Y=9.20%/12,
PV=165,504.60,FV=0, CPT-->PMT=1,366.16 |
N=324, I/Y=10.20%/12,
PV=163,190.58,FV=0, CPT-->PMT=1,482.63 |
N=312, I/Y=11.20%/12,
PV=161,989.36,FV=0, CPT-->PMT=1,600.07 |
N=300, I/Y=12.20%/12,
PV=160,875.23,FV=0, CPT-->PMT=1,718.20 |
Total Payment made (PMT*number of periods for which that payment is made) | =1137.65*12 = 13,651.79 | 1251.03*12 = 15,012.38 | 1366.16*12=16,393.95 | 1482.63*12 = 17,791.54 | 1600.07*12 = 19,200.89 | 1718.20*300 = 515,459.93 |
Steps for calculation:
The current mortgage payment is $?. (monthly) | 1,137.65 |
The payment after the first adjustment is $?. (monthly) | 1,251.03 |
The maximum payment is ?$? (monthly) | 1,718.20 |
The total interest paid for a $167,600?, ?30-year mortgage is $? Total amount paid over the life - Original Principal= (13651.79 +15012.38 +16393.95 +17791.54 +19200.89 +515459.93)-167600 = 597510.48-167600 = 429,910.48
Based on same method, all other parts have been calculated as follows:
2)b) | |||||
Year | 0 to 2 | 3 | 4 | 5 | Total payment made |
Principal outstanding | 167,600.00 | 162,311.40 | 160,879.02 | 159,772.53 | |
Initial interest rate (I/Y) | 7.20% | 9.20% | 11.20% | 12.20% | |
Number of payments made during the period before next reset (n) | 36.00 | 12.00 | 12.00 | 300.00 | |
Period remaining (months) (N) | 360.00 | 324.00 | 312.00 | 300.00 | |
Monthly payments (PMT) | 1,137.65 | 1,358.80 | 1,589.11 | 1,706.42 | |
Total Payment made (PMT*number of periods for which that payment is made) | 40,955.37 | 16,305.63 | 19,069.28 | 511,926.77 | 588,257.04 |
The current mortgage payment is $?. (monthly) | 1,137.65 |
The payment after the first adjustment is $?. (monthly) | 1,358.80 |
The maximum payment is ?$? (monthly) | 1,706.42 |
The total interest paid for a $167,600?, ?30-year mortgage is $? | 588257.04-167600 = 420657.04 |
2)C) |
|||||
Year | 0 to 5 | 6 | 7 | 8 | Total payment made |
Principal outstanding | 167,600.00 | 158,097.13 | 156,389.68 | 155,025.54 | |
Initial interest rate (I/Y) | 7.20% | 9.20% | 11.20% | 13.20% | |
Number of payments made during the period before next reset (n) | 60.00 | 12.00 | 12.00 | 276.00 | |
Period remaining (months) (N) | 360.00 | 300.00 | 288.00 | 276.00 | |
Monthly payments (PMT) | 1,137.65 | 1,348.46 | 1,567.60 | 1,792.82 | |
Total Payment made (PMT*number of periods for which that payment is made) | 68,258.94 | 16,181.58 | 18,811.17 | 494,819.24 | 598,070.93 |
The current mortgage payment is $?. (monthly) | 1,137.65 |
The payment after the first adjustment is $?. (monthly) | 0.00 |
The maximum payment is ?$? (monthly) | 0.00 |
The total interest paid for a $167,600?, ?30-year mortgage is $? | 598070.93-167600 = 430470.93 |
2)d) | ||||
Year | 0 to 5 | 6 to 10 | 11 to 30 | Total payment made |
Principal outstanding | 167,600.00 | 158,097.13 | 149,132.66 | |
Initial interest rate (I/Y) | 7.20% | 10.20% | 13.20% | |
Number of payments made during the period before next reset (n) | 60.00 | 60.00 | 240.00 | |
Period remaining (months) (N) | 360.00 | 300.00 | 240.00 | |
Monthly payments (PMT) | 1,137.65 | 1,458.98 | 1,768.49 | |
Total Payment made (PMT*number of periods for which that payment is made) | 68,258.94 | 87,538.76 | 424,438.44 | 580,236.14 |
The current mortgage payment is $?. (monthly) | 1,137.65 |
The payment after the first adjustment is $?. (monthly) | 1,458.98 |
The maximum payment is ?$? (monthly) | 1,768.49 |
The total interest paid for a $167,600?, ?30-year mortgage is $? | 579355.43-167600 = 411755.43 |