You've decided to buy a house that is valued at $1 million. You have $250,000 to use as a down payment on the house, and want to take out a mortgage for the remainder of the purchase price. Your bank has approved your $750,000 mortgage, and is offering a standard 30-year mortgage at a 12% fixed nominal interest rate (called the loan's annual percentage rate or APR). Under this loan proposal, your mortgage payment will be per month. (Note: Round the final value of any interest rate used to four decimal places.) Your friends suggest that you take a 15-year mortgage, because a 30-year mortgage is too long and you will pay a lot of money on interest. If your bank approves a 15-year, $750,000 loan at a fixed nominal interest rate of 12% (APR), then the difference in the monthly payment of the 15-year mortgage and 30-year mortgage will be ?(Note: Round the final value of any interest rate used to four decimal places. ) It is likely that you won't like the prospect of paying more money each month, but if you do take out a 15-year mortgage, you will make far fewer payments and will pay a lot less in interest. How much more total interest will you pay over the life of the loan if you take out 30-year mortgage Instead of a 15-year mortgage? $1,365,290.21 O $1,480,992.77 O $1,596,695.33 O $1,157,025.60
You've decided to buy a house that is valued at $1 million. You have $250,000 to use as a down payment on the house, and want to take out a mortgage for the remainder of the purchase price. Your bank has approved your $750,000 mortgage, and is offering a standard 30-year mortgage at a 12% fixed nominal interest rate (called the loan's annual percentage rate or APR). Under this loan proposal, your mortgage payment will be per month. (Note: Round the final value of any interest rate used to four decimal places.) Your friends suggest that you take a 15-year mortgage, because a 30-year mortgage is too long and you will pay a lot of money on interest. If your bank approves a 15-year, $750,000 loan at a fixed nominal interest rate of 12% (APR), then the difference in the monthly payment of the 15-year mortgage and 30-year mortgage will be ?(Note: Round the final value of any interest rate used to four decimal places. ) It is likely that you won't like the prospect of paying more money each month, but if you do take out a 15-year mortgage, you will make far fewer payments and will pay a lot less in interest. How much more total interest will you pay over the life of the loan if you take out 30-year mortgage Instead of a 15-year mortgage? $1,365,290.21 O $1,480,992.77 O $1,596,695.33 O $1,157,025.60
Fundamentals of Financial Management (MindTap Course List)
15th Edition
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter12: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 5P: EQUIVALENT ANNUAL ANNUITY Faleye Consulting is deciding which of two computer systems to purchase....
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Transcribed Image Text:Ch 05- Assignment - Time Value of Money
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Mortgages, loans taken to purchase a property, involve regular payments at fixed intervals and are treated as reverse annuities. Mortgages are the
reverse of annuities, because you get a lump-sum amount as a loan in the beginning, and then you make monthly payments to the lender.
You've decided to buy a house that is valued at $1 million. You have $250,000 to use as a down payment on the house, and want to take out a
mortgage for the remainder of the purchase price. Your bank has approved your $750,000 mortgage, and is offering a standard 30-year mortgage at a
12% fixed nominal interest rate (called the loan's annual percentage rate or APR). Under this loan proposal, your mortgage payment will be
v per month. (Note: Round the final value of any interest rate used to four decimal places.)
Your friends suggest that you take a 15-year mortgage, because a 30-year mortgage is too long and you will pay a lot of money on interest. If your
bank approves a 15-year, $750,000 loan at a fixed nominal interest rate of 12% (APR), then the difference in the monthly payment of the 15-year
mortgage and 30-year mortgage will be
v
?(Note: Round the final value of any interest rate used to four decimal places. )
It is likely that you won't like the prospect of paying more money each month, but if you do take out a 15-year mortgage, you will make far fewer
payments and will pay a lot less in interest. How much more total interest will you pay over the life of the loan if you take out 30-year mortgage
instead of a 15-year mortgage?
O $1,365,290.21
O $1,480,992.77
O $1,596,695.33
O $1,157,025.60
Which of the following statements is not true about mortgages?
O The ending balance of an amortized loan contract will be zero.
O Mortgages are examples of amortized loans.
O The payment allocated toward principal in an amortized loan is the residual balance-that is, the difference between total payment and
the interest due.
O Mortgages always have a fixed nominal interest rate.
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