quiz-mba810-wi99 - 1 Five years ago John obtained a 25-year...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
1. Five years ago John obtained a 25-year $200,000 mortgage loan for his house at annual stated rate of 10% from the Old Bank, requiring monthly payments. He is interested in making $50,000 worth of renovations on the house, and is considering two alternative financing options being offered by the New Bank: Option A: The New Bank will give him a second 20-year mortgage for a $50,000 loan at an annual interest rate of 9%. Option B: If he refinances his first mortgage through the New Bank, then the bank will give him a 20-year mortgage for the $50,000 for renovation plus whatever remaining amount he owes to the Old Bank at an annual rate of only 8%. Unfortunately, paying off the mortgage at the Old Bank has a penalty of $ 5,000. Which option, A or B, should he choose? [-- completely optional hint-- Compare (Old mortgage + Option A) versus Option B]. 2. At the Big Time Dealership, you have found the car you want. To take it home, the dealer wants an up front payment of $5,000 and the rest in monthly payments of $500 for the next
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Ask a homework question - tutors are online