A4 Answer Basic Mortgage Problem

A4 Answer Basic Mortgage Problem - a. Why is this rate the...

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A4 Basic Mortgage Problem Provident Funding Mortgage Rate Quotes as of 6/30/2011. [Note: pts/credit indicates the % of the principle borrowed as a fee that must be paid to borrow at the designated rate. 1 point = 1% of the amount borrowed. Negative points are payments made to the borrower at that rate.] Rate Pts/Credit % Pts/Credit $ 4.250 % 1.250 % $1,250.00 4.375 % 0.00 % $0.00 4.500 % -0.500 % ($500.00) 4.625 % -1.000 % ($1,000.00) 4.750 % -1.625 % ($1,625.00) i) Using the above table, calculate the payment for a $200,000 Mortgage for 30 years at 4.375%? N = 30 * 12; PV = -$200,000; I = 4.375% solve for pmt = ? ; = $998.57
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Unformatted text preview: a. Why is this rate the market rate? Because no points are given or required to obtain it. ii) Calculate the payment if the rate was 4.250%? 4.25%? N = 30 * 12; PV = -$200,000; I = 4.375% solve for pmt = ? ; = $983.88 iii) Determine the monthly saving at the lower rate. Calculate cost to obtain a 4.250% loan? 998.57 - $983.88 = $14.69 iv) If you make the payment at the market rate for 5 years, what would be the remaining balance on your mortgage @ 4.25%, set no = 25*12 and solve for PV = ? = $181,615.39...
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