106 Disc wk 3 - BUS106:IntrotoFinance Agenda Attendance...

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April 15, 2011 BUS 106:  Intro to Finance
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Agenda Attendance Concept Review Practice Problem Notes : Homework 2 is due on Wednesday by midnight.
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Perpetuity A perpetuity is an annuity that has no end, or a stream of cash payments that continues forever. ( i = r, from lecture notes )
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Annuity An annuity is any terminating stream of fixed payments over a specified period of time. ( i = r, from lecture notes )
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Mortgage Loan A mortgage loan is an example of an annuity . It is “a loan of $L that is repaid in equal installments of $C over a prescribed length of time of n -periods” (in months). Ex: 30 year loan n = 30 yrs*12 mths/yr = n=360
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Remember…. V = value of house L = loan Therefore, if the loan is at most 80% of the value of the house… …then, the maximum loan is… L = 0.80 x V And, the down payment is… Dp = V - L
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Practice Problem Mr. Gottlob Asturias earns $135,000 a year . He is in the market for a house, and wants to finance it with a 30-year fixed-rate mortgage loan with monthly payments. The lending institutions inform him that his loan will be approved [a] if the monthly payment on the loan
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106 Disc wk 3 - BUS106:IntrotoFinance Agenda Attendance...

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