Question
In: Economics
Sabrina has decided to invest her savings in real estate. 20 months ago, she purchased a...
Sabrina has decided to invest her savings in real estate. 20 months ago, she purchased a duplex for $800,000. She could afford to make a down-payment of $50,000. The bank gave her a 30-year mortgage with constant monthly payments at a quoted APR of 12% with semi-annual compounding. Today, (after making her last monthly payment to the bank) Sabrina was able to resell her property for $815,000. With the money she has left after paying the bank for the remaining mortgage, Sabrina will make a down-payment on a new property. What is the down-payment she can make on this new property? Hint: First find the monthly payments she must make.
a. $73,922.57
b. $60,718.76
c. $45,320.68
d. $70,026.35
e. $58,026.36
Solutions
Expert Solution
Answer : d. $70,026.35
Complete calculations below :
Loan Amount = Property value - Down Payment = 800,000 - 50,000 = $750,000
Life of loan = 30 years
Rate of interest = APR 12% compounded semi annually
Calculations :
Interest per month = $7,547.91
Therefore, total payment in 20 months = 7,547.91*20 = 150,958.20
Balance at the end of 20 months :
| Beginning Balance | Interest | Principal | Ending Balance | |
| 1 | $750,000.00 | $7,319.10 | $228.81 | $749,771.19 |
| 2 | $749,771.19 | $7,316.86 | $231.04 | $749,540.15 |
| 3 | $749,540.15 | $7,314.61 | $233.30 | $749,306.85 |
| 4 | $749,306.85 | $7,312.33 | $235.57 | $749,071.28 |
| 5 | $749,071.28 | $7,310.03 | $237.87 | $748,833.40 |
| 6 | $748,833.40 | $7,307.71 | $240.19 | $748,593.21 |
| 7 | $748,593.21 | $7,305.37 | $242.54 | $748,350.67 |
| 8 | $748,350.67 | $7,303.00 | $244.91 | $748,105.77 |
| 9 | $748,105.77 | $7,300.61 | $247.30 | $747,858.47 |
| 10 | $747,858.47 | $7,298.20 | $249.71 | $747,608.76 |
| 11 | $747,608.76 | $7,295.76 | $252.15 | $747,356.62 |
| 12 | $747,356.62 | $7,293.30 | $254.61 | $747,102.01 |
| Year #1 End | ||||
| 13 | $747,102.01 | $7,290.81 | $257.09 | $746,844.92 |
| 14 | $746,844.92 | $7,288.31 | $259.60 | $746,585.32 |
| 15 | $746,585.32 | $7,285.77 | $262.13 | $746,323.19 |
| 16 | $746,323.19 | $7,283.21 | $264.69 | $746,058.50 |
| 17 | $746,058.50 | $7,280.63 | $267.27 | $745,791.22 |
| 18 | $745,791.22 | $7,278.02 | $269.88 | $745,521.34 |
| 19 | $745,521.34 | $7,275.39 | $272.52 | $745,248.82 |
| 20 | $745,248.82 | $7,272.73 | $275.18 | $744,973.65 |
Amount required to pay off the loan in full = 744973.65 (assuming no other cost)
Amount from sale = 815,000
Balance= 815,000 - 7,44,973.65 = 70,026.35
Rahul Sunny answered 1 year agoRelated Solutions
Sabrina has decided to invest her savings in real estate. 20months ago, she purchased a...
Sabrina has decided to invest her savings in real estate. 20
months ago, she purchased a duplex for $800,000. She could afford
to make a down-payment of $50,000. The bank gave her a 30-year
mortgage with constant monthly payments at a quoted APR of 12% with
semi-annual compounding. Today, (after making her last monthly
payment to the bank) Sabrina was able to resell her property for
$815,000. With the money she has left after paying the bank for the
remaining...
Sabrina has decided to invest her savings in real estate. 20months ago, she purchased a...
Sabrina has decided to invest her savings in real estate. 20
months ago, she purchased a duplex for $800,000. She could afford
to make a down-payment of $50,000. The bank gave her a 30-year
mortgage with constant monthly payments at a quoted APR of 12% with
semi-annual compounding. Today, (after making her last monthly
payment to the bank) Sabrina was able to resell her property for
$815,000. With the money she has left after paying the bank for the
remaining...
A developer has 20 acres of real estate for a project. She has two projects to...
A developer has 20 acres of real estate for a project. She has
two projects to consider for the land. She can only select one
project as both require all 20 acres. The developer is looking at a
10-year time frame for this investment. The expected cash flows
from the projects are described below: PROJECT A: Apartments with
retail space. The project will require $1,140,927.00 invested
today, and an additional $800,000.00 in one year. The project will
generate a cash...
A developer has 20 acres of real estate for a project. She has two projects to...
A developer has 20 acres of real estate for a project. She has
two projects to consider for the land. She can only select one
project as both require all 20 acres. The developer is looking at a
10-year time frame for this investment. The expected cash flows
from the projects are described below:
PROJECT A: Apartments with retail space. The project will
require $1,039,260.00 invested today, and an additional $800,000.00
in one year. The project will generate a cash...
A real estate agent has 12 properties that she shows. She feels that there is a...
A real estate agent has 12 properties that she shows. She feels
that there is a 40% chance of selling any one property during a
week. The chance of selling any one property is independent of
selling another property. Compute the probability of selling at
least 5 properties in one week. Round your answer to four decimal
places.
Lucy purchased a home. Her monthly payments are $1,534. Her annual real estate tax is $3,000...
Lucy purchased a home. Her monthly payments are $1,534. Her
annual real estate tax is $3,000 along with an annual insurance
premium of $1,800. Lucy's bank requires that her monthly payments
include an escrow deposit for the tax and insurance. What is the
total payment each month for Lucy?
Jissica sells real estate. She saw that in a sample of 23 of her homebuyers, 18...
Jissica sells real estate. She saw that in a sample of 23 of
her homebuyers, 18 found her through a friend. At α = 0.07 can she
reject the promo that 80% of homebuyers find their real estate
agent through a friend?
a) H1__________ b)
__________ c) __________ d) _______________________________
Mary's risk aversion is 1.4. What percent of her savings should she invest in a portfolio...
Mary's risk aversion is 1.4. What percent of her savings should
she invest in a portfolio with E(r)=13% and standard deviation of
20%, if the risk free rate to invest in is 4.7% and the rate at
which money can be borrowed is 6.5%?
Five years ago, Farley Walton purchased a 30% interest in Oak Motte Partners, a real estate...
Five years ago, Farley Walton purchased a 30% interest in Oak
Motte Partners, a real estate development partnership. He paid
$50,000 for a 30% interest in capital, profits and losses. This
year, at the end of the year, Farley sold his interest in the
partnership for $250,000 cash to an unrelated buyer. The following
table summarizes Farley’s distributive share of partnership profits
and losses, as well as distributions received and additional
capital contributions made by Farley over the five year...
You manage a real estate investment company. One year ago, the company purchased 10 parcels of...
You manage a real estate investment company. One year ago, the
company purchased 10 parcels of land distributed throughout the
community for $ 11.2 million each. A recent appraisal of the
properties indicates that five of the parcels are now worth $9.0
million each, while the other five are worth $17.0 million each.
Ignoring any income received from the properties and any taxes paid
over the year, calculate the investment company’s accounting
earnings and its economic earnings in each of...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Changes to Itemized Deduction Tax reform that affects both individuals and businesses was enacted in December...
- Explain why some businesses use both above the line and below the line methods of promotion...
- What are the rich and lean perspectives in developmental psychology ? Why does this "rich vs...
- In order to manage change and implement change strategies, it is important to avoid implementing irrelevant...
- Smoky Mountain Corporation makes two types of hiking boots—Xtreme and the Pathfinder. Data concerning these two...
- Drug delivery systems are often ‘pelletized’ as spheres. Construct the control volume. Determine the continuity equation...
- NIST cybersecurity framework. Summarize the purpose, approach, goals, and scope of this topic publication.( cite references)
ADVERTISEMENT