Principles of Finance_Biederman_Date_032210

Principles of Finance_Biederman_Date_032210 - Exam 2 April...

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Unformatted text preview: Exam 2: April 9 - No multiple choice or bonus points CHAPTER 5 Mortgages Annual payments of principle and interest on $100000 (PV), 30 years- 8% mortgage? – monthly payment $736.55- 6% mortgage?—monthly payment $599.55 Put money borrowed in PV because you get it now FV=0 because when loan is paid off there is not future value APR = Mortgage/ Number of periods 2 nd PV—to get other information $100000 mortgage Interest payment- 8000 At 30% marginal tax rate Tax saving= 30% x 8000=2400- Net int. cost= 8000-2400= 5600 Higher tax bracket= greater the savings= greater advantage mortgage becomes to you- Cost of mortgage(s) should not be more than 30% of your living pay (rule of thumb) Rent vs. Own? Depends on such things as” 1. Your age 2. Your mobility 3. Your tax situation 4. Your job situation 5. Your mortgage options 6. The state of the housing market 7. The state of the rental marker A house is not just an investment—it is also consumption. You cannot sleep on the floor of the A house is not just an investment—it is also consumption....
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This note was uploaded on 08/30/2010 for the course FINC 311 taught by Professor Murphy during the Spring '08 term at University of Delaware.

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Principles of Finance_Biederman_Date_032210 - Exam 2 April...

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