A borrower is purchasing a property for $180,000 and can choose between two possible loan alternatives. The first is a 90% loan for 25 years at 9% interest and 1 point and the second is a 95% loan for 25 years at 9.25% interest and 1 point. Assuming the loan will be held to maturity, what is the incremental cost of borrowing the extra money? 12.01% O 14.34% O 13.50% O 13.66%

A borrower is purchasing a property for $180,000 and can choose between two possible loan alternatives. The first is a 90% loan for 25 years at 9% interest and 1 point and the second is a 95% loan for 25 years at 9.25% interest and 1 point. Assuming the loan will be held to maturity, what is the incremental cost of borrowing the extra money? 12.01% O 14.34% O 13.50% O 13.66%

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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You borrow $2mn at an interest rate of 5% per year to purchase a real estate property for the cost of $2.5mn. The borrowing costs are due only at the end of the year. 1). At what property price is it optimal to default on the loan when the borrowing rate is 1%, 5% and 10%?2). Consider three different interest rates of 1%, 5% and 10% and different equity shares of 5%, 20% and 50%. Discuss how the different interest rates and leverage affect the return on equity.
Consider the following options for a $153,000 mortgage. Calculate the monthly payment and total closing costs for each option. Which option would Clearly explain why you chose the option that you chose. you choose? Option 1: a 30-year fixed-rate loan at 4.3% with $1500 closing cost and no points • Option 2: a 30-year fixed-rate loan at 3.8% with $1200 closing cost and 2 points
am. 84.
To purchase a new equipment it is necessary to borrow $23000. The equipment dealer offers a 8-year loan at an interest rate of 4% compounded annually. If you make only one payment at the end of the loan period repaying the principal and interest what is the total amount that must be paid back? Question 4 options: $27012 $26766 $28920 $31477 $25075
What is amortization? Describe other types of loan arrangements. If you could afford to pay cash for a home, is it worth it to take a mortgage out anyway? If no, why not. If yes, why. Here are the variables:30 year amortized mortgage at 5% fixedInvestment opportunity at 3.5% fixedPrice of the home is $500,000. You’ll either invest $400,000 and make a down payment on the house of $100,000 and mortgage the rest. Hint: Find out if the interest earned on the investment is more or less than the interest made on the investment.
H5. A person has a property that they want to sell, and they need to know the present value of the following options: (for both options consider a rate of 21.6%) a. Advance payments of $25,000 every six months for 5 years b. Payments of $9,000 quarterly for 4 years and a final payment of $20,000 nine months after the last deposit
A borrower can obtain an 80 percent loan with an 9 percent interest rate and monthly payments. The loan is to be fully amortized over 25 years. Alternatively, he could obtain a 95 percent loan at an 9.5 percent rate with the same loan term. The borrower plans to own the property for the entire loan term. Required: a. What is the incremental cost of borrowing the additional funds? (Hint: The dollar amount of the loan does not affect the answer.) b. What is the incremental cost of borrowing the additional funds if 2 points were charged on the 95 percent loan? c. What is the incremental cost of borrowing the additional funds if the borrower planned to own the property for only five years? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the incremental cost of borrowing the additional funds if the borrower planned to own the years? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Incremental…
Give typing answer with explanation and conclusion Assume you want to borrow $300,000 and have been presented with two options. The first option is a fully amortizing loan with an interest rate of 3% and $4000 of origination fees and points. The second option is an interest only loan with an interest rate of 4% and $5000 of origination fees and points. Both loans are for 30 years and have monthly payments. Further assume that if the borrower chooses the interest only loan, any money saved on the monthly payment can be invested with a projected return of 7%. Also assume that the proceeds from the investment will first be used to pay off any remaining balance on the loan. How much money will the investor have left at the end of 30 years after repaying the loan? Group of answer choices None, the investor will owe $12,373.42 $323,060.72 $22,063.08 $30,750.78
5) A lender is willing to provide financing at a DSCR of 1.25 at 5.0% interest with 25-year monthly amortization on a $225,000 NOI. What are my monthly payments? 6) If the lender in question 5 charges 2 points, what is my cost of financing? 7) Based on question 6, What is my cost of financing if I pay the loan off at the endof year 5? 8) What is the loan balance at the end of year 5?
Assume you need a $87,000.00 loan for a home. Compute the monthly payment for each option. Assume that the loans are fixed rate and that closing costs are the same in both cases. Round to the nearest penny.Option 1: a 30 year-loan at an APR of 7.25%The monthly payment for Option 1 would be $.Option 2: a 15 year-loan at an APR of 6.5%The monthly payment for Option 2 would be $
A borrower looking to borrow $100,000 can obtain an 80 percent loan with an 8 percent interest rate and monthly payments. The loan is to be fully amortized over 25 years. Alternatively, he could obtain a 90 percent loan at an 10 percent rate with the same loan term. What is the incremental ANNUAL cost of borrowing the additional funds? 20.13 17.42 23.98 18.19

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