Question

A3-8 Suppose you want to borrow $200,000 to purchase a home. You have found terms that include a 30-year note with a nominal rate of 7.0% com - pounded monthly. The loan includes payment of 2.5 points, which will be paid out of the loan at closing. One point is equal to 1% of the loan value.) A) Calculate the monthly mortgage payment. B) How much interest is paid in the 2nd month's payment? C) How much principal is paid in the 2nd month's payment? D) Assuming the points are the only relevant closing costs associated with the loan, what is the APR on this loan? Case D recognizes that you will not have the full $200,000 loan value to apply against the purchase of the home (due to the points), but you will have to pay back $200,000 in principal payments plus the accrued interest.

Answer 1

Answer Pageno Given that, or 0.58 pe Jmonths 2 SOMO Loan amount = $200,000 Team = 30 yearl er, 360 montag Intoult Rate = 77.pa closing costę = 2.5% of loan amoure = $5000 (200000X2-57) Monthly Moortgage Payment: Loan amoune x [xx(41)] [(1+r)t_1 monthly interest rate t = tenure in months Monthly mortagogue Payment = 200000 x [0-584x(+056 [1 +0.9879] 200000 x (0.0058 X(140-es 1 [C140.0088) 30-2 $1330-60 Here วา Il 360 360

B) Int siest paid in the and months Payment: Pageno@ the fior st mont, the paymond of # 1330.60 intoult - Cacocos X0.587) 200000 X0.0058 = 1166.67 Principal supayment $163.94 Intocelt paid = (200006 -163.qu) X0.58"r. FC 199836.06x0.0058 116s.tl Principal iş paid in the and months Payment: = (1330. 60-1165.7.) - 164.89 D. APR for the loan net loan amount ! $195000 but the supayment is for $200000 loan, The ApRis essentially the discount rate Which will equate the monthly pay more =$1330.60 paid Over 360 months

Page no 19 5000 - 1330.60 1330-60 + 1330-60 (1 +42 + (1 + y)2 (14 34 Prof annuity - Monthlycash flow x [1-(1977 ( x{1-{1+4)*60) ( 12 19 5000 =1330.66 x (0) T X = 7.25% by Felving weget x=7252 app for this loan 7.25%