John has 1 mil dollars. John got a mortgage for a 1 mil dollar house bought with a 10% downpayment, 2% annual interest compounded semi-annually, and over a 25 year amortization period. John holds a bank account that pays 10% annual interest, which he can store money in while paying off the house. John can decide how he will pay the mortgage through a predetermined monthly payment amount. John will make cumulative payments of “x” when he finishes paying off the mortgage at time “z.” Assume a 2% inflation rate. Calculate how John can pay off the house while maximizing his bank account in 25 years by determining “x” and “z.”
John has 1 mil dollars. John got a mortgage for a 1 mil dollar house bought with a 10% downpayment, 2% annual interest compounded semi-annually, and over a 25 year amortization period. John holds a bank account that pays 10% annual interest, which he can store money in while paying off the house. John can decide how he will pay the mortgage through a predetermined monthly payment amount. John will make cumulative payments of “x” when he finishes paying off the mortgage at time “z.” Assume a 2% inflation rate. Calculate how John can pay off the house while maximizing his bank account in 25 years by determining “x” and “z.”
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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John has 1 mil dollars. John got a mortgage for a 1 mil dollar house bought with a 10% downpayment, 2% annual interest compounded semi-annually, and over a 25 year amortization period. John holds a bank account that pays 10% annual interest, which he can store money in while paying off the house. John can decide how he will pay the mortgage through a predetermined monthly payment amount.
John will make cumulative payments of “x” when he finishes paying off the mortgage at time “z.” Assume a 2% inflation rate. Calculate how John can pay off the house while maximizing his bank account in 25 years by determining “x” and “z.”
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