Suppose that you are given the option to borrow a fixed rate US mortgage of $80,000...

Suppose that you are given the option to borrow a fixed rate US mortgage of $80,000 at 12% for 25 years with monthly payments. Alternatively, you may borrow another fixed rate US mortgage of $90,000 for 25 years with monthly payments at a contract interest rate to be determined. The lender would like to have an effective annual yield of 25% on the incremental cost of borrowing (i.e., on the $10,0000), reflecting the borrower’s increased default risk. Formulate how you would compute the contract interest rate on the entire $90,000 loan.

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jeff jeffy answered 1 year ago

suppose that you are given the option to borrow a fixed rate US mortgage of $80,000...

suppose that you are given the option to borrow a fixed rate US mortgage of $80,000 at 12% for 25 years with monthly payments. Alternatively, you may borrow another fixed rate US mortgage of $90,000 for 25 years with monthly payments at a contract interest rate to be determined. The lender would like to have an effective annual yield of 25% on the incremental cost of borrowing (i.e., on the $10,000), reflecting the borrower’s increased default risk. Formulate how you...

(use equations, not computer) Suppose that you are given the option to borrow a fixed rate...

(use equations, not computer) Suppose that you are given the option to borrow a fixed rate US mortgage of $80,000 at 12% for 25 years with monthly payments. Alternatively, you may borrow another fixed rate US mortgage of $90,000 for 25 years with monthly payments at a contract interest rate to be determined. The lender would like to have an effective annual yield of 25% on the incremental cost of borrowing (i.e., on the $10,0000), reflecting the borrower’s increased default...

class: Derivative Securities . Company X wishes to borrow US dollars at a fixed rate of...

class: Derivative Securities . Company X wishes to borrow US dollars at a fixed rate of interest. Company Y wishes to borrow Japanese Yen at a fixed rate of interest. The amount required by the two companies is the same at current exchange rate. The companies are subject to the following interest rates: Yen Dollar Company X 5% 8.5% Company Y 6.3% 9% Design a swap that will net a bank, acting as intermediary, 30 basis points per annum and...

Suppose that a 15-year mortgage loan for $200,000 is obtained. The mortgage is a level-payment, fixed-rate,...

Suppose that a 15-year mortgage loan for $200,000 is obtained. The mortgage is a level-payment, fixed-rate, fully amortized mortgage and the mortgage rate is 7.0% (APR, monthly). a. Find the monthly mortgage payment. b. Compute an amortization schedule for the first six months. c. What will the mortgage balance be at the end of the 15th year? d. If an investor purchased this mortgage, what will the timing of the cash flow be assuming that the borrower does not default?

Suppose you take a fixed-rate mortgage for $250,000 at 4.50% for 30 years, monthly payments. A....

Suppose you take a fixed-rate mortgage for $250,000 at 4.50% for 30 years, monthly payments. A. (1 pt) How much of the payment is interest for month 100? B. (1 pt) How much total interest do you pay in the first six years?

Mortgage Payment You currently have a 30-year fixed rate mortgage with an annual interest rate of...

Mortgage Payment You currently have a 30-year fixed rate mortgage with an annual interest rate of 6%. You have had the mortgage 4 years, and on September 1, 2015 you made your 48th payment. The original principal amount was $280,000 and you monthly payment, without taxes and insurance, are $1,678.74 per month, computed using the Excel function =PMT(0.5%,360,280000,0,0). Starting with your original mortgage your banker calls and says that you could refinance your existing mortgage (6% rate, 30-year original term)...

On March 1, you borrow $239,000 to buy a house. The mortgage rate is 7.75%. The...

On March 1, you borrow $239,000 to buy a house. The mortgage rate is 7.75%. The loan is to be repaid in equal monthly payments over 20 years. The first payment is due on April 1. How much of the third payment applies to the principal balance? (Assume that each month is equal to 1/12 of a summer).

You borrow $149000 to buy a house. The mortgage rate is 7.5% and the loan period...

You borrow $149000 to buy a house. The mortgage rate is 7.5% and the loan period is 30 years. Payments are made monthly. What is the monthly mortgage payment.

Suppose that you are considering a conventional, fixed-rate 15-year mortgage loan for $300,000. The lender quotes...

Suppose that you are considering a conventional, fixed-rate 15-year mortgage loan for $300,000. The lender quotes an APR of 4%, compounded monthly; mortgage payments would be monthly, beginning one month after the closing on your home purchase. In the tenth year of your mortgage (months 109 through 120), what would be the total dollar amount of the interest paid? Do not round at intermediate steps in your calculation A) $9,619.05 B)$6,412.70 C)$5,284.99 D)$7,500.27 .

Suppose that you are considering a conventional, fixed-rate 30-year mortgage loan for $100,000. The lender quotes...

Suppose that you are considering a conventional, fixed-rate 30-year mortgage loan for $100,000. The lender quotes an APR of 7.28%, compounded monthly; mortgage payments would be monthly, beginning one month after the closing on your home purchase. After 17 years of payments, what is the balance outstanding on your loan? Do not round at intermediate steps in your calculation. Round your answer to the nearest penny. Do not type the $ symbol.

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