Congratulations on finding your dream home! The 4-bedroom, 3-bath home is perfect for you and your family. You have negotiated a great price with the seller of 159,000.Youhave10,000 saved to put down on this investment (down payment). You have decided that your monthly budget for a mortgage will be no more than $775. You have been talking with two different lenders to help you mortgage your dream home. Lender #1 will lend you up to $150,000 at 5% for 25 years. Lender #2 will lend you $159,000 at 4.5% for 30 years. a) Which lender would you use? Why? Calculate the monthly payment under each lender option. Use Table 14-1 to find the appropriate table factors. Label and show all of your work. b) Remembering your budget of $775 per month, how would your lender choice change if you did not have any money to use as a down payment? Recalculate the monthly payment under each lender option. Label and show all of your work.
Congratulations on finding your dream home! The 4-bedroom, 3-bath home is perfect for you and your family. You have negotiated a great price with the seller of 159,000.Youhave10,000 saved to put down on this investment (down payment). You have decided that your monthly budget for a mortgage will be no more than $775. You have been talking with two different lenders to help you mortgage your dream home. Lender #1 will lend you up to $150,000 at 5% for 25 years. Lender #2 will lend you $159,000 at 4.5% for 30 years. a) Which lender would you use? Why? Calculate the monthly payment under each lender option. Use Table 14-1 to find the appropriate table factors. Label and show all of your work. b) Remembering your budget of $775 per month, how would your lender choice change if you did not have any money to use as a down payment? Recalculate the monthly payment under each lender option. Label and show all of your work.
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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Question
Congratulations on finding your dream home! The 4-bedroom, 3-bath home is perfect for you and your family. You have negotiated a great price with the seller of 159,000.Youhave10,000 saved to put down on this investment (down payment). You have decided that your monthly budget for a mortgage will be no more than $775. You have been talking with two different lenders to help you mortgage your dream home.
- Lender #1 will lend you up to $150,000 at 5% for 25 years.
- Lender #2 will lend you $159,000 at 4.5% for 30 years.
a) Which lender would you use? Why? Calculate the monthly payment under each lender option. Use Table 14-1 to find the appropriate table factors. Label and show all of your work.
b) Remembering your budget of $775 per month, how would your lender choice change if you did not have any money to use as a down payment? Recalculate the monthly payment under each lender option. Label and show all of your work.
Transcribed Image Text:Interest
10
15
20
25
30
35
40
Rate (%)
Years
Years
Years
Years
Years
Years
Years
Years
3.50
18.19
9.89
7.15
5.80
5.01
4.49
4.13
3.87
3.75
18.30
10.01
7.27
5.93
5.14
4.63
4.28
4.03
4.00
18.42
10.12
7.40
6.06
5.28
4.77
4.43
4.18
4.25
18.53
10.24
7.52
6.19
5.42
4.92
4.58
4.34
4.50
18.64
10.36
7.65
6.33
5.56
5.07
4.73
4.50
4.75
18.76
10.48
7.78
6.46
5.70
5.22
4.89
4.66
5.00
18.87
10.61
7.91
6.60
5.85
5.37
5.05
4.82
5.25
18.99
10.73
8.04
6.74
5.99
5.52
5.21
4.99
5.50
19.10
10.85
8.17
6.88
6.14
5.68
5.37
5.16
5.75
19.22
10.98
8.30
7.02
6.29
5.84
5.54
5.33
6.00
19.33
11.10
8.44
7.16
6.44
6.00
5.70
5.50
6.25
19.45
11.23
8.57
7.31
6.60
6.16
5.87
5.68
6.50
19.57
11.35
8.71
7.46
6.75
6.32
6.04
5.85
6.75
19.68
11.48
8.85
7.6
6.91
6.49
6.21
6.03
7.00
19.80
11.61
8.99
7.75
7.07
6.65
6.39
б.21
7.25
19.92
11.74
9.13
7.90
7.23
6.82
6.56
6.40
7.50
20.04
11.87
9.27
8.06
7.39
6.99
6.74
6.58
7.75
20.16
12.00
9.41
8.21
7.55
7.16
6.92
6.77
8.00
20.28
12.13
9.56
8.36
7.72
7.34
7.10
6.95
8.25
20.40
12.27
9.70
8.52
7.88
7.51
7.28
7.14
8.50
20.52
12.40
9.85
8.68
8.05
7.69
7.47
7.33
8.75
20.64
12.53
9.99
8.84
8.22
7.87
7.65
7.52
9.00
20.76
12.67
10.14
9.00
8.39
8.05
7.84
7.71
9.25
20.88
12.80
10.29
9.16
8.56
8.23
8.03
7.91
9.50
21.00
12.94
10.44
9.32
8.74
8.41
8.22
8.10
9.75
21.12
13.08
10.59
9.49
8.91
8.59
8.41
8.30
10.00
21.25
13.22
10.75
9.65
9.09
8.78
8.60
8.49
10.25
21.37
13.35
10.90
9.82
9.26
8.96
8.79
8.69
10.50
21.49
13.49
11.05
9.98
9.44
9.15
8.98
8.89
10.75
21.62
13.63
11.21
10.15
9.62
9.33
9.18
9.08
11.00
21.74
13.78
11.37
10.32
9.80
9.52
9.37
9.28
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