To differentiate: The four CPM loans, advantages to borrowers and risks to lenders, common element among each of the loans.

Question

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Answer 1

Question

Chapter 4, Problem 1Q

Summary Introduction

To differentiate: The four CPM loans, advantages to borrowers and risks to lenders, common element among each of the loans.

Expert Solution & Answer

Explanation of Solution

First type of the CPM loan is ‘constant amortization mortgage’; it is determined by calculating the monthly installments to be applied on the ‘principle’. After computing the monthly installments, interest is calculated on the balance amount monthly; and then by adding the principle installments and monthly interest, final monthly payment is calculated.

Second type of CPM loan is ‘constant payment mortgage’; in this type of monthly payments are calculated on constant basis and interest in also calculated on constant basis on the original loan amount.

In the third type of CPM loan; the loan is repaid over a certain period of time on the desire of the lender.

In the four type of CPM loan at the end of the period of the ‘mortgage loan’ the principal is paid in full and the lender get interest at fixed rate on the monthly loan outstanding.

The common element in each of the loan is if they all are initiated at same ‘interest rate’ then they all will yield same amount to the lender.

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Answer 2

Question

Chapter 4, Problem 1Q

Summary Introduction

To differentiate: The four CPM loans, advantages to borrowers and risks to lenders, common element among each of the loans.

Expert Solution & Answer

Explanation of Solution

First type of the CPM loan is ‘constant amortization mortgage’; it is determined by calculating the monthly installments to be applied on the ‘principle’. After computing the monthly installments, interest is calculated on the balance amount monthly; and then by adding the principle installments and monthly interest, final monthly payment is calculated.

Second type of CPM loan is ‘constant payment mortgage’; in this type of monthly payments are calculated on constant basis and interest in also calculated on constant basis on the original loan amount.

In the third type of CPM loan; the loan is repaid over a certain period of time on the desire of the lender.

In the four type of CPM loan at the end of the period of the ‘mortgage loan’ the principal is paid in full and the lender get interest at fixed rate on the monthly loan outstanding.

The common element in each of the loan is if they all are initiated at same ‘interest rate’ then they all will yield same amount to the lender.

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Answer 3

Question

Chapter 4, Problem 1Q

Summary Introduction

To differentiate: The four CPM loans, advantages to borrowers and risks to lenders, common element among each of the loans.

Expert Solution & Answer

Explanation of Solution

First type of the CPM loan is ‘constant amortization mortgage’; it is determined by calculating the monthly installments to be applied on the ‘principle’. After computing the monthly installments, interest is calculated on the balance amount monthly; and then by adding the principle installments and monthly interest, final monthly payment is calculated.

Second type of CPM loan is ‘constant payment mortgage’; in this type of monthly payments are calculated on constant basis and interest in also calculated on constant basis on the original loan amount.

In the third type of CPM loan; the loan is repaid over a certain period of time on the desire of the lender.

In the four type of CPM loan at the end of the period of the ‘mortgage loan’ the principal is paid in full and the lender get interest at fixed rate on the monthly loan outstanding.

The common element in each of the loan is if they all are initiated at same ‘interest rate’ then they all will yield same amount to the lender.

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Answer 4

Question

Chapter 4, Problem 1Q

Summary Introduction

To differentiate: The four CPM loans, advantages to borrowers and risks to lenders, common element among each of the loans.

Expert Solution & Answer

Explanation of Solution

First type of the CPM loan is ‘constant amortization mortgage’; it is determined by calculating the monthly installments to be applied on the ‘principle’. After computing the monthly installments, interest is calculated on the balance amount monthly; and then by adding the principle installments and monthly interest, final monthly payment is calculated.

Second type of CPM loan is ‘constant payment mortgage’; in this type of monthly payments are calculated on constant basis and interest in also calculated on constant basis on the original loan amount.

In the third type of CPM loan; the loan is repaid over a certain period of time on the desire of the lender.

In the four type of CPM loan at the end of the period of the ‘mortgage loan’ the principal is paid in full and the lender get interest at fixed rate on the monthly loan outstanding.

The common element in each of the loan is if they all are initiated at same ‘interest rate’ then they all will yield same amount to the lender.

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Answer 5

Chapter 4, Problem 1Q

Summary Introduction

To differentiate: The four CPM loans, advantages to borrowers and risks to lenders, common element among each of the loans.

Expert Solution & Answer

Explanation of Solution

First type of the CPM loan is ‘constant amortization mortgage’; it is determined by calculating the monthly installments to be applied on the ‘principle’. After computing the monthly installments, interest is calculated on the balance amount monthly; and then by adding the principle installments and monthly interest, final monthly payment is calculated.

Second type of CPM loan is ‘constant payment mortgage’; in this type of monthly payments are calculated on constant basis and interest in also calculated on constant basis on the original loan amount.

In the third type of CPM loan; the loan is repaid over a certain period of time on the desire of the lender.

In the four type of CPM loan at the end of the period of the ‘mortgage loan’ the principal is paid in full and the lender get interest at fixed rate on the monthly loan outstanding.

The common element in each of the loan is if they all are initiated at same ‘interest rate’ then they all will yield same amount to the lender.

Answer 6

Chapter 4, Problem 1Q

Summary Introduction

To differentiate: The four CPM loans, advantages to borrowers and risks to lenders, common element among each of the loans.

Expert Solution & Answer

Explanation of Solution

First type of the CPM loan is ‘constant amortization mortgage’; it is determined by calculating the monthly installments to be applied on the ‘principle’. After computing the monthly installments, interest is calculated on the balance amount monthly; and then by adding the principle installments and monthly interest, final monthly payment is calculated.

Second type of CPM loan is ‘constant payment mortgage’; in this type of monthly payments are calculated on constant basis and interest in also calculated on constant basis on the original loan amount.

In the third type of CPM loan; the loan is repaid over a certain period of time on the desire of the lender.

In the four type of CPM loan at the end of the period of the ‘mortgage loan’ the principal is paid in full and the lender get interest at fixed rate on the monthly loan outstanding.

The common element in each of the loan is if they all are initiated at same ‘interest rate’ then they all will yield same amount to the lender.

Answer 7

Chapter 4, Problem 1Q

Summary Introduction

To differentiate: The four CPM loans, advantages to borrowers and risks to lenders, common element among each of the loans.

Answer 8

Expert Solution & Answer

Explanation of Solution

First type of the CPM loan is ‘constant amortization mortgage’; it is determined by calculating the monthly installments to be applied on the ‘principle’. After computing the monthly installments, interest is calculated on the balance amount monthly; and then by adding the principle installments and monthly interest, final monthly payment is calculated.

Second type of CPM loan is ‘constant payment mortgage’; in this type of monthly payments are calculated on constant basis and interest in also calculated on constant basis on the original loan amount.

In the third type of CPM loan; the loan is repaid over a certain period of time on the desire of the lender.

In the four type of CPM loan at the end of the period of the ‘mortgage loan’ the principal is paid in full and the lender get interest at fixed rate on the monthly loan outstanding.

The common element in each of the loan is if they all are initiated at same ‘interest rate’ then they all will yield same amount to the lender.