Ch.15-Study Questions-pg424 - Chapter 15: Mortgage...

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Chapter 15: Mortgage Calculations and Decisions Robb Page 18-Mar-2010 FIN 497: Real Estate Principles Professor Clements Study Questions – pages 424-425. 1. Calculate the original loan size of a fixed-payment mortgage if the monthly payment is $1,146.78, the annual interest is 8.0%, and the original loan term is 15 years. $120,000 2. For a loan of $100,000, at 7 percent interest for 30 years, find the balance at the end of 4 years and 15 years. Loan payment is $665.30 4 years = $95,474.55 15 years = $74,018.87 3. On an adjustable rate mortgage, do borrowers always prefer smaller (tighter) rate caps that limit the amount the contract interest rate can increase in any given year or over the life of the loan? It depends…based on the expectations of future rates. For example, an ARM with a price cap will have a higher initial interest rate and a higher margin, and may include more upfront costs. 4. Consider a $75,000 mortgage loan with an annual interest rate of 8%. The loan term is 7 years, but monthly payments will be based on a 30-year amortization schedule. What is the monthly payment? What will be the balloon payment at the end of the loan term? a) Monthly payment = $550.32
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This note was uploaded on 04/25/2010 for the course FIN 497 taught by Professor Clements during the Spring '10 term at University of Missouri-Kansas City .

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Ch.15-Study Questions-pg424 - Chapter 15: Mortgage...

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