Five years ago, Bob purchased an apartment in Tai Po of $2,000,000. He made a down payment of 30% and financed the balance with a 20 years' conventional mortgage to be amortized through monthly payments. The term is adjustable-rate mortgage (ARM) with interest of 8% per year compounded monthly. Currently, the interest rate for his ARM is 5% per year compounded monthly. Bob is thinking of refinancing his property by paying an extra amount of $500,000 now and to amortize the rest of the loan in the next 8 years. (a) What was Bob's monthly mortgage payment for his first 5 years? (interest is 8%) (b) What is Bob's outstanding principal now if he does not refinance his apartment? (interest is 8%) (c) What is Bob's outstanding principal now if he refinances his apartment by paying the extra payment? (d) What will Bob's new monthly mortgage payment be (after the reset) if he refinances his apartment? (interest is 5%)

Five years ago, Bob purchased an apartment in Tai Po of $2,000,000. He made a down payment of 30% and financed the balance with a 20 years' conventional mortgage to be amortized through monthly payments. The term is adjustable-rate mortgage (ARM) with interest of 8% per year compounded monthly. Currently, the interest rate for his ARM is 5% per year compounded monthly. Bob is thinking of refinancing his property by paying an extra amount of $500,000 now and to amortize the rest of the loan in the next 8 years. (a) What was Bob's monthly mortgage payment for his first 5 years? (interest is 8%) (b) What is Bob's outstanding principal now if he does not refinance his apartment? (interest is 8%) (c) What is Bob's outstanding principal now if he refinances his apartment by paying the extra payment? (d) What will Bob's new monthly mortgage payment be (after the reset) if he refinances his apartment? (interest is 5%)

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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Josh purchased a condominium 5 years ago for $190,000. He made a down payment of 20% and financed the balance with a 30-year conventional mortgage to be amortized through monthly payments with an interest rate of 4%/year compounded monthly on the unpaid balance. What is the present value (in dollars) of the loan after 5 years of ownership? (Round your answer to the nearest cent.) The condominium is now appraised at $250,000. Josh plans to start his own business and wishes to tap into the equity that he has in the condominium. If Josh can secure a new 30-year conventional mortgage at the same rate to refinance his condominium based on a loan of 80% of the appraised value, how much equity (in dollars) will he have after the new loan? How much cash (in dollars) can Josh muster for his business? (Disregard taxes. Round your answer to the nearest cent.)
A couple wishes to borrow money using the equity in their home for collateral. A loan company will loan them up to 70% of their equity. They puchased their home 10 years ago for $61,760. The home was financed by paying 20% down and signing a 30-year mortgage at 8.1% on the unpaid balance. Equal monthly payments were made to amortize the loan over the 30-year period. The net market value of the house is now $100,000. After making their 120th payment, they applied to the loan company for the maximum loan. How much (to the nearest dollar) will they receive?
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