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1. Maria takes out a 30-year fixed rate mortgage at 5% to buy a house that costs $450,000. To avoid paying mortgage insurance, she needs to put 20% of the purchase price as a down payment. (a) How much does she need for the down payment? How much money does Maria need to borrow? (b) How much will Maria's monthly mortgage payments be? (c) How much interest will Maria pay over 30 years? What percentage of the total cost of the mortgage is the interest? (d) Maria could instead choose a 15-year fixed rate mortgage at 4.5%. Calculate her monthly payments and total interest paid with this option and compare these results to the answers you gave in (b). Assume she is still putting 20% down. (e) Calculate the future value of the two options below. Which option below gives her more wealth in 30 years? Ontion 1. Got tbe 20v

1. Maria takes out a 30-year fixed rate mortgage at 5% to buy a house that costs $450,000. To avoid paying mortgage insurance, she needs to put 20% of the purchase price as a down payment. (a) How much does she need for the down payment? How much money does Maria need to borrow? (b) How much will Maria's monthly mortgage payments be? (c) How much interest will Maria pay over 30 years? What percentage of the total cost of the mortgage is the interest? (d) Maria could instead choose a 15-year fixed rate mortgage at 4.5%. Calculate her monthly payments and total interest paid with this option and compare these results to the answers you gave in (b). Assume she is still putting 20% down. (e) Calculate the future value of the two options below. Which option below gives her more wealth in 30 years? Ontion 1. Got tbe 20v

Essentials Of Investments
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
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I only need the highlighted portion of this question answered. a & b have already been completed.
1. Maria takes out a 30-year fixed rate mortgage at 5% to buy a house that costs $450,000. To avoid paying mortgage insurance, she needs to put 20% of the purchase price as a down payment. (a) How much does she need for the down payment? How much money does Maria need to borrow? (b) How much will Maria's monthly mortgage payments be? (c) How much interest will Maria pay over 30 years? What percentage of the total cost of the mortgage is the interest? (d) Maria could instead choose a 15-year fixed rate mortgage at 4.5%. Calculate her monthly payments and total interest paid with this option and compare these results to the answers you gave in (b). Assume she is still putting 20% down. A (e) Calculate the future value of the two options below. Which option below gives her more wealth in 30 years? Option 1: Get the 30-year mortgage at 5% APR. Invest the difference in the mortgage payments in a stock index fund that has an average APR of 7.5%. Option 2: Get the 15-year mortgage at 4.5%. After 15 years, invest in a stock index fund that has an average APR of 7.5% with the money that used to go to paying the mortgage.
Transcribed Image Text:1. Maria takes out a 30-year fixed rate mortgage at 5% to buy a house that costs $450,000. To avoid paying mortgage insurance, she needs to put 20% of the purchase price as a down payment. (a) How much does she need for the down payment? How much money does Maria need to borrow? (b) How much will Maria's monthly mortgage payments be? (c) How much interest will Maria pay over 30 years? What percentage of the total cost of the mortgage is the interest? (d) Maria could instead choose a 15-year fixed rate mortgage at 4.5%. Calculate her monthly payments and total interest paid with this option and compare these results to the answers you gave in (b). Assume she is still putting 20% down. A (e) Calculate the future value of the two options below. Which option below gives her more wealth in 30 years? Option 1: Get the 30-year mortgage at 5% APR. Invest the difference in the mortgage payments in a stock index fund that has an average APR of 7.5%. Option 2: Get the 15-year mortgage at 4.5%. After 15 years, invest in a stock index fund that has an average APR of 7.5% with the money that used to go to paying the mortgage.
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