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

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

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