ch09 sol - CHAPTER 9 ANSWERS TO END-OF-CHAPTER QUESTIONS 1....

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1 CHAPTER 9 ANSWERS TO END-OF-CHAPTER QUESTIONS 1. If you had a 7 percent, $100,000 30-year fixed-rate mortgage, how long would it take before you had repaid half the loan balance due? If you paid an extra $100 per month to reduce the principal due on the mortgage, how long would it take to repay half the principal due? In the case where you paid an extra $100 per month, how long would it take to repay the entire loan? (Hint: It probably would help to use a computer spreadsheet program to make these calculations; set it up in the same way that Exhibit 9.1 is set up.) Per Exhibit 9.1, loan B (bottom), the $50,000 balance is reached, per the table, between month 9 and 10 in year 21. If the homeowner had paid an added $100 per month, or $765.30, the balance would drop to $50,000 in 13 years and 9 months. An extra $100 or a $765.30 payment would pay off the loan in n = 247 months, about 20 years and 7 months. 3. If your mortgage balance was $60,000 and you had a floating-rate mortgage that called for you to pay interest at an annual rate of 2.75 percent over the one-year T-bill rate and the T-bill rate has been averaging 2.05 percent, how much interest would you owe on your mortgage next month? With the rate now at 4.8 percent and the balance of $60,000, one would pay $60,000(0.048/12) or $240.00 in interest. 5.
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This note was uploaded on 11/08/2011 for the course MAT/FIN 272 taught by Professor Burns during the Spring '11 term at Central Connecticut State University.

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ch09 sol - CHAPTER 9 ANSWERS TO END-OF-CHAPTER QUESTIONS 1....

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