QUESTION 4 Ann got a 30 year FRM with annual payments equal to $12,000 per year....

QUESTION 4 Ann got a 30 year FRM with annual payments equal to $12,000 per year. After 2 years of payments Ann will refinance the balance into a 28 year FRM with annual payments equal to $11,500 per year. Refinancing will cost Ann $2,500. Ann will prepay the new loan 3 years after refinancing. She will save $4,000 on her loan balance when she prepays. What is Ann’s annualized IRR from refinancing?

QUESTION 5 Lucy bought a house for $100,000. Lucy’s annual cost of ownership net of tax savings is exactly equal to the annual rent she would have paid to live in the same house. The house price grows 4.5% annually (compounded annually). Suppose buying costs are 5% (of the purchase price of the house) and selling costs are 8% (of the selling price of the house). Lucy will sell the house in one year. What is Lucy’s annualized IRR? (hint: it will be negative)

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Ann got a 30 year Fully Amortizing FRM for $1,000,000 at an annual interest rate of...

Ann got a 30 year Fully Amortizing FRM for $1,000,000 at an annual interest rate of 7% compounded monthly, with monthly payments. After 5 years of payments, Ann can refinance the balance into a 25 year Fully Amortizing FRM at an annual interest rate of 6% compounded monthly, with monthly payments. Refinancing will cost Ann 1 point and $1,500 in closing costs. If Ann refinances into this loan after 5 years, what will be her total cost of refinancing? Answer...

Ann got a 30 year Fully Amortizing FRM for $1,000,000 at an annual interest rate of...

Ann got a 30 year Fully Amortizing FRM for $1,000,000 at an annual interest rate of 5.5% compounded monthly, with monthly payments. After 5 years of payments, Ann can refinance the balance into a 25 year Fully Amortizing FRM at an annual interest rate of 4.75% compounded monthly, with monthly payments. Refinancing will cost Ann 1 point and $1,500 in closing costs. If Ann refinances into this loan and makes payments for 25 years, what will be her annualized IRR...

Tom got a 30 year fully amortizing FRM for $500,000 at 8%, with constant monthly payments....

Tom got a 30 year fully amortizing FRM for $500,000 at 8%, with constant monthly payments. After 3 years of payments rates fall and he can get a 27 year FRM at 5%, but he must pay 7 points and $20000 in closing costs to get the new loan. Think of the refinancing decision as an investment for Tom, he pays a fee now but saves money in the future in the form of lower payments. What is the IRR...

Consider a $12,000 loan with 4 equal annual payments and 10% interest. a. Calculate the annual...

Consider a $12,000 loan with 4 equal annual payments and 10% interest. a. Calculate the annual payment, n = 4, r = 0.10. b. Prepare a complete loan payment schedule table for this loan. You need the time period, the beginning principal, payment, interest paid, principal paid, and ending principal in your table. c. Now assume that the loan is fully amortized over 4 years, however, the interest rate is variable. That is, the bank changes a different rate each...

4. Ann obtains a fully amortizing 30 year Fixed Rate Mortgage with annual payments for $135,000...

4. Ann obtains a fully amortizing 30 year Fixed Rate Mortgage with annual payments for $135,000 at 5.25%. How much does Ann need to pay annually? 7. Ann obtains a fully amortizing 30 year Fixed Rate Mortgage with monthly payments for $135,000 at 5.25%. What will be Ann’s mortgage balance after 20 years of payments (ie after 240 months)?

$10,000,000 of a 7% 10 year FRM pool making annual payments is allocated to a PO/IO...

$10,000,000 of a 7% 10 year FRM pool making annual payments is allocated to a PO/IO class. At approximately what level of prepayment will the IRR of IO class be 0? (Use the excel sheet/graph, round to the nearest percentage. For example, if your answer is two percent, enter 2). The answer on Chegg is wrong, please show me the work

A bank makes a 30-year fully amortizing FRM for $100,000 at an annual interest rate of...

A bank makes a 30-year fully amortizing FRM for $100,000 at an annual interest rate of 7% compounded monthly, with monthly payments. What is the market value of this loan five years later if the annual market interest rate for this loan drops to 4%? (Show your answer rounded to two decimal places.)

A loan of $10,000 is amortized by equal annual payments for 30 years at an effective...

A loan of $10,000 is amortized by equal annual payments for 30 years at an effective annual interest rate of 5%. The income tax rate level is at 25%. Assume the tax on the interest earned is based on the amortization schedule. a) Determine the income tax in the 10th year b) Determine the total income taxes over the life of the loan c) Calculate the present value of the after-tax payments using the before-tax yield rate. Answer to the...

Problem 1: A. 10 equal annual end-of-the-year payments of $82,500 per year beginning in 20 years...

Problem 1: A. 10 equal annual end-of-the-year payments of $82,500 per year beginning in 20 years will be received B. One lump-sum of $1,000,000 in 30 years will be received C. One payment of $200,000 in 10 years, a second payment of $200,000 in 20 years, and a third payment of $200,000 in 30 years will be received Question: What is the present value of the policies at a discount rate of 4 percent? Please show all work in excel...

Ann is looking for a fully amortizing 30 year Fixed Rate Mortgage with monthly payments for...

Ann is looking for a fully amortizing 30 year Fixed Rate Mortgage with monthly payments for $4,500,000. Mortgage A has a 4.38% interest rate and requires Ann to pay 1.5 points upfront. Mortgage B has a 6% interest rate and requires Ann to pay zero fees upfront. Assuming Ann makes payments for 2 years before she sells the house and pays the bank the the bank the balance, which mortgage has the lowest cost of borrowing (lowest annualized IRR)

Subjects