MGMT310_lecture6_problem

MGMT310_lecture6_problem - monthly payments of $2,500....

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
asic loan types Basic loan types Pure discount loans Borrower receives money today, and repays single lump sum some point in the future ‐‐‐ easy Interest only loans Pay interest each period, then re pay the entire principal at some point in the future ‐‐‐ easy mortized loans Amortized loans Repay interest + parts of the principal each period Let’s do a problem/example of this one!!
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
ortgage problem Mortgage problem 1. You want to buy a house on a 30 year loan. You have no down payment money, 1 but you can afford
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: monthly payments of $2,500. Suppose that the current 30 year fixed te mpounded onthly hats e ost xpensive rate is 6%, compounded monthly. What s the most expensive house you can afford? 2. How must of your first months payment goes toward paying off the principal? Keep in mind: We ignored that under current federal tax law, the interest portion of your mortgage payment is tax deductible (so w/ tax deduction, you could afford more!) 1 note: banks no longer allow zero down...
View Full Document

Page1 / 2

MGMT310_lecture6_problem - monthly payments of $2,500....

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online