Which of the following statements is not true about mortgages? O Mortgages are examples of amortized loans. O The ending balance of an amortized loan contract will be zero. O The payment allocated toward principal in an amortized loan is the residual balance-that is, the difference between total payment and the interest due. O Mortgages always have a fixed nominal interest rate.
Which of the following statements is not true about mortgages? O Mortgages are examples of amortized loans. O The ending balance of an amortized loan contract will be zero. O The payment allocated toward principal in an amortized loan is the residual balance-that is, the difference between total payment and the interest due. O Mortgages always have a fixed nominal interest rate.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:13. Mortgage payments
Mortgages, loans taken to purchase a property, involve regular payments at fixed intervals and are treated as reverse annuities. Mortgages are the
reverse of annuities, because you get a lump-sum amount as a loan in the beginning, and then you make monthly payments to the lender.
You've decided to buy a house that is valued at $1 million. You have $300,000 to use as a down payment on the house, and want to take out a
mortgage for the remainder of the purchase price. Your bank has approved your $700,000 mortgage, and is offering a standard 30-year mortgage at a
12% fixed nominal interest rate (called the loan's annual percentage rate or APR). Under this loan proposal, your mortgage payment will be
per month. (Note: Round the final value of any interest rate used to four decimal places.)
Your friends suggest that you take a 15-year mortgage, because a 30-year mortgage is too long and you will pay a lot of money on interest. If your
bank approves a 15-year, $700,000 loan at a fixed nominal interest rate of 12% (APR), then the difference in the monthly payment of the 15-year
mortgage and 30-year mortgage will be
?(Note: Round the final value of any interest rate used to four decimal places. )
It is likely that you won't like the prospect of paying more money each month, but if you do take out a 15-year mortgage, you will make far fewer
payments and will pay a lot less in interest. How much more total interest will you pay over the life the loan if you take out a 30-year mortgage
instead of a 15-year mortgage?
O $1,382,261.76
O $1,490,250.96
O $1,079,892.00
O $1,274,272.56
Transcribed Image Text:Which of the following statements is not true about mortgages?
O Mortgages are examples of amortized loans.
O The ending balance of an amortized loan contract will be zero.
O The payment allocated toward principal in an amortized loan is the residual balance-that is, the difference between total payment and
the interest due.
O Mortgages always have a fixed nominal interest rate.
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Transcribed Image Text:13. Mortgage payments
Mortgages, loans taken to purchase a property, involve regular payments at fixed intervals and are treated as reverse annuities. Mortgages are the
reverse of annuities, because you get a lump-sum amount as a loan in the beginning, and then you make monthly payments to the lender.
You've decided to buy a house that is valued at $1 million. You have $300,000 to use as a down payment on the house, and want to take out a
mortgage for the remainder of the purchase price. Your bank has approved your $700,000 mortgage, and is offering a standard 30-year mortgage at a
12% fixed nominal interest rate (called the loan's annual percentage rate or APR). Under this loan proposal, your mortgage payment will be
per month. (Note: Round the final value of any interest rate used to four decimal places.)
Your friends suggest that you take a 15-year mortgage, because a 30-year mortgage is too long and you will pay a lot of money on interest. If your
bank approves a 15-year, $700,000 loan at a fixed nominal interest rate of 12% (APR), then the difference in the monthly payment of the 15-year
mortgage and 30-year mortgage will be
?(Note: Round the final value of any interest rate used to four decimal places. )
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