Question

Mortgages, loans taken to purchase a property, involve regular payments at fixed intervals and are treated as reverse annuities. Mortgages are the reverse of annuities, because you get a lump-sum amount as a loan in the beginning, and then you make monthly payments to the lender. You've decided to buy a house that is valued at $1 million. You have $250,000 to use as a down payment on the house and want to take out a mortgage for the remainder of the purchase price. Your bank has approved your $750,000 mortgage and is offering a standard 30-year mortgage at a 9% fixed nominal interest rate (called the loan's annual percentage rate, or APR). Under this loan proposal, your mortgage payment will be (Note: Round the final value of any interest rate used to four decimal places.) per month Your friends suggest that you take a 15-year mortgage, because a 30-year mortgage is too long and you will pay a lot of money on interest. If your bank approves a 15-year, $750,000 loan at a fixed nominal interest rate of 9% (APR), then the difference in the monthly payment of the 15-year mortgage and 30-year mortgage will be ? (Note: Round the final value of any interest rate used to four decimal places.) It is likely that you won't like the prospect of paying more money each month, but if you do take out a 15-year mortgage, you will make far fewer payments and will pay a lot less in interest. How much more total interest will you pay over the life of the loan if you take out a 30-year mortgage instead of a 15-year mortgage? $1,028,123.14 O $803,221.20 O $1,108,445.26 $947,801.02

Answer 1

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PV, FV, ANNUITY (Autosaved) - Microsoft Excel (Product Activation Failed) Review View Add-Ins Formulas Data - 2x 11 A A = = = V Wrap Text General File Home Insert Page Layout * Cut Calibri E Copy Paste Format Painter BIU Clipboard Font -A E E E Merge & Center - $ % & ... Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format Σ AutoSum : A Fill 2 Sort & 2 Clear Filter Editing Find & Select Alignment Number Cells BG226 AX AY AZ BA BB BC BD BE BF BG BH BI 30 YEAR 2 223 224 225 226 227 228 LOAN APR MONTHLY RATE MONTHS 750000 (1000000-250000] 9% 0.7500% 360 (30 X12) 6034.67 EXCEL =PMT(0.75%,BC227,-BC224) ANS 1 PMT 229 230 15 YEAR 231 232 LOAN MONTHLY RATE MONTHS PMT 750000 0.7500% 180 (15 X 12) 7607.00 EXCEL =PMT(0.75%,BC232,-BC224) 233 234 235 ANS 2 1572.33 (7607-6034.67] 236 237 238 239 DIFEFRENCE IN PMT = MORE INTEREST PAYABLE TOTAL PAYMENT UNDER 30 YEAR LOAN TOTAL PAYMENT UNDER 15 YEAR LOAN MORE INTEREST PAYABLE 2172481.20 (6034.67 X 360] 1369260.00 [7607 X 180] 803221.20 ANS 3 240 241 ANS 4 FALSE: MORTGAGES ALWAYS HAVE A FIXED NOMINAL INTEREST RATE THIS STATEMENT IS NOT TRUE 242 K 243 M Rea LOAN OPTIONS pv, fv, annuity/CAP STRU VALUE profit margin loan with points LOCK BOX DILUTION O CALCULATOR ferences DOLLAR COST AVG EXPONPER APR CPI ear FVAPIT BOJ 120% DEF 9 ENG 01-12-2019