Concept explainers
Exercises 65–76 are based on the following table, which shows annual rates for various types of loans in 2015.22 Assume monthly payments and compounding periods. [hinT: See Examples 5 and 7.]
Loan Type | 30-YearMortgage | 15-YearMortgage | 5-YearCar Loan | 4-YearCar Loan | Credit Cards |
October Rate (%) | 3.93 | 3.14 | 4.30 | 4.24 | 13.10 |
November Rate (%) | 4.09 | 3.31 | 4.31 | 4.26 | 13.10 |
December Rate (%) | 4.09 | 3.34 | 4.34 | 4.29 | 13.10 |
Mortgages You were considering buying a $150,000 home with a 30-year mortgage in October 2015, but you suspected that the seller would agree to lower the price by $10,000 if you held out another 2 months. The real estate agent urged you to go ahead with the $150,000 purchase immediately, arguing that interest rates would likely move up if you waited. Which scenario would lead to the lower mortgage payments? By how much would they differ?
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