You want to buy a $183,000 home. You plan to pay 10% as a down payment, and take out a 30 year loan at 4% interest for the rest. a) What is the amount of the down payment? $ b) What will the amount of the mortgage? $ c) The bank charges 2 points on the loan. What is the amount charged for points?

You want to buy a $183,000 home. You plan to pay 10% as a down payment, and take out a 30 year loan at 4% interest for the rest. a) What is the amount of the down payment? $ b) What will the amount of the mortgage? $ c) The bank charges 2 points on the loan. What is the amount charged for points?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 15P

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

100%

You want to buy a $183,000 home. You plan to pay 10% as a down payment, and take out a 30 year loan at 4% interest for the rest.

a) What is the amount of the down payment?

$

b) What will the amount of the mortgage?

$

c) The bank charges 2 points on the loan. What is the amount charged for points?

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