Question

Asked Jan 10, 2020

3 views

**Problem.** Suppose you want to purchase a home for $440,000 with a 30-year mortgage at 4.24% interest. Suppose also that you can put down 25%. Find

(a) What are the monthly payments?

(b) What is the total amount paid for principal and interest?

(c) What is the amount saved if this home is financed for 15 years instead of for 30 years?

Step 1

Value of home is $440,000, down payment is of amount $110,000 (25%*$440,000). Actual loan amount is $330,000 ($440,000 - $110,000).

a) Monthly payment on the loan can be calculated using monthly interest rate (r ) as 4.24%/12 = 0.3533333% and number of periods ( n ) as 12*30 = 360 in the below formula:

Step 2

Answer: Monthly payment on a loan of $330,000 is $1,621.47.

Step 3

Total amount paid is the number of payments...

Tagged in

Find answers to questions asked by student like you

Show more Q&A

Q: O 1 75% AT&T LTE 11:52 AM Exit 26 4. Conglomerate Inc. is trading at $80/share, and is about to anno...

A: Calculation of Maximum Exchange Ratio:The maximum exchange ratio is close to 1.43.Excel Spreadsheet:

Q: Compute the PI statistic for Project X and note whether the firm should accept or reject the project...

A: PI refers to profitability index, it is used to evaluate the profitability of an investment or a pro...

Q: Compute the NPV for Project X and accept or reject the project with the cash flows shown below if th...

A: Calculation of NPV:The NPV is $30.76.Since the NPV of the project is positive, this project can be “...

Q: What are the implications of the change in present value based on risk (a decrease in FCF by 10%)? I...

A: Present Value:It is the current or discounted value of the future inflow and outflow. It is calculat...

Q: You are given the following probability distribution for a stock: Probability Outc...

A: Calculation of expected return, standard deviation and coefficient of variation using excel is as fo...

Q: Excluding Venture Capital, what are the sources of equity funding from external sources. Please list...

A: Equity funding is the way to raise capital by selling company’s shares to the investors. In this typ...

Q: O 1 75% AT&T LTE 11:52 AM Exit 56 9. Which of the following is NOT a direct action that can be taken...

A: All the other actions can be taken directly by the shareholders, but for initiating a proxy contest,...

Q: Don’s Captain Morgan, Inc. needs to raise $12.70 million to finance plant expansion. In discussions ...

A: The offer price for the share is $20.60.The receivable price per share is $16.75.The underwriter spr...

Q: A small firm has a line of credit that bears a rate of 8%. One quarter of the firm's total financing...

A: Calculate the weighted average cost of capital (WACC) as follows: