FINANCE 4 QUESTIONS ASSIGNMENT

FINANCE 4 QUESTIONS ASSIGNMENT

Subject: Business / Finance
Question

Part |. Assume you purchase a home for $185,000 with a 30-year mortgage set at a fixed rate
of 8.25% and 0 points. Based upon this information, answer the following questions. 1. What would you pay monthly as a mortgage payment? 2. How much interest and principal will be paid on the first month’s
payment? The second month’s payment? 3. What is the total amount of interest you will pay over the life of the loan
under this 30-year mortgage at an 8.25% interest rate? 4. If you paid down your interest rate to 7.75% (by paying 2 points)
a. What would be your monthly mortgage payment? b. How much interest and principal will be paid on the first month’s
payment? The second month’s payment? 5. What is the total amount of interest you will pay over the life of the loan
under this 30-year mortgage at a 7.75% interest rate?

Partll. Assume you purchase a home for $185,000 with a 15-year mortgage set at a fixed rate
of 7.75% and 0 points. Based upon this information, answer the following questions. 1. 2. What would you pay monthly as a mortgage payment? How much interest and principal will be paid on the first month’s payment?
The second month’s payment? What is the total amount of interest you will pay over the life of the loan under
this 15-year mortgage at a 7.75% interest rate? If you paid down your interest rate to 7.25% (by paying 2 points)
0. What would be your monthly mortgage payment? d. How much interest and principal will be paid on the first month’s
payment? The second month’s payment? What is the total amount of interest you will pay over the life of the loan
under this 15-year mortgage at a 7.25% interest rate?

Part “I. You wish to purchase a home for $170,000. You plan to put down 10% of the purchase
price, and the bank has offered you a 30 year loan at APR of 7.75%. If you will be
making monthly payments, answer the following questions. (Show all work. Circle your
answers.) [5 pts.] 1. What will be your monthly payment?
2. What is the amount of principle and interest paid on the 25th
payment? 3. How much interest will you pay over the life of the loan? 4. How much is owed at the end of year 20 (Le, at the end of 240
payments)? 5. How much interest will be paid in year 20 (Le, over payments 229
to 240)?

Part IV. Assume the following items regarding your purchase of a home: . You have saved up $20,000 toward the purchase of your home.
0 Your salary is $36,000 per year. c The bank will lend you up to a total amount where your monthly home loan
payment will equal 28% of your monthly salary. . The bank is offering you a 30 year loan (360 payments) with an APR of 6%.
. Closing costs are expected to be 4% of the total loan amount. In light of the above factors, answer the following questions: 1. What is the maximum amount the bank will lend you?
2. If you borrow this entire amount, how much house can you buy? (Remember, closing costs are expected to be 4% of the value of
the home and that you have saved $20,000 toward your home
purchase.)