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Homework Answers
| ANALYSIS OF CHOICE 1, 7% Rate, point0.00 | |||||||||||
| Price of house | $250,000 | ||||||||||
| Down payment=20%*250000= | $50,000 | ||||||||||
| Pv | Loan Amount | $200,000 | |||||||||
| Rate | Monthly interest=(7/12)% | 0.5833% | |||||||||
| Nper | Number of months of repayment | 360 | (30*12) | ||||||||
| PMT | Monthly payment | $1,331 | (Using PMT function of excel with Rate=0.5833%,Nper=360,Pv=-200000) | ||||||||
| Excel Command: PMT(0.5833%,360,-200000) | |||||||||||
| CASH FLOW: | |||||||||||
| A | Points | $0 | |||||||||
| B | Origination Cost | $2,500 | |||||||||
| Pv1=Pv-A-B | Net Loan amount received | $197,500 | |||||||||
| Pmt | Monthly payments | $1,331 | |||||||||
| Nper | Number of months of repayment | 360 | |||||||||
| RATE1 | Effective monthly cost | 0.5940% | (Using RATE function of excel with Nper=360,Pmt=1331,Pv=-197500,) | ||||||||
| Excel Command: RATE(360,1331,-197500) | |||||||||||
| RATE1*12 | Effective Annual Cost | 7.13% | |||||||||
| ANALYSIS OF CHOICE 2, 6.75% Rate, point1.0 | |||||||||||
| Price of house | $250,000 | ||||||||||
| Down payment=20%*250000= | $50,000 | ||||||||||
| Pv | Loan Amount | $200,000 | |||||||||
| Rate | Monthly interest=(6.75/12)% | 0.5625% | |||||||||
| Nper | Number of months of repayment | 360 | |||||||||
| PMT | Monthly payment | $1,297 | (Using PMT function of excel with Rate=0.5625%,Nper=360,Pv=-200000) | ||||||||
| Excel Command: PMT(0.5625%,360,-200000) | |||||||||||
| CASH FLOW: | |||||||||||
| A | Points=1%*200000 | $2,000 | |||||||||
| B | Origination Cost | $2,500 | |||||||||
| Pv1=Pv-A-B | Net Loan amount received | $195,500 | |||||||||
| Pmt | Monthly payments | $1,297 | |||||||||
| Nper | Number of months of repayment | 360 | |||||||||
| RATE1 | Effective monthly cost | 0.5810% | (Using RATE function of excel with Nper=360,Pmt=1297,Pv=-195500,) | ||||||||
| Excel Command: RATE(360,1297,-195500) | |||||||||||
| RATE1*12 | Effective Annual Cost | 6.97% | |||||||||
| ANALYSIS OF CHOICE 3, 6.25% Rate, point 3.00 | |||||||||||
| Price of house | $250,000 | ||||||||||
| Down payment=20%*250000= | $50,000 | ||||||||||
| Pv | Loan Amount | $200,000 | |||||||||
| Rate | Monthly interest=(6.25/12)% | 0.5208% | |||||||||
| Nper | Number of months of repayment | 360 | |||||||||
| PMT | Monthly payment | $1,231 | (Using PMT function of excel with Rate=0.5208%,Nper=360,Pv=-200000) | ||||||||
| Excel Command: PMT(0.5208%,360,-200000) | |||||||||||
| CASH FLOW: | |||||||||||
| A | Points=3%*200000 | $6,000 | |||||||||
| B | Origination Cost | $2,500 | |||||||||
| Pv1=Pv-A-B | Net Loan amount received | $191,500 | |||||||||
| Pmt | Monthly payments | $1,231 | |||||||||
| Nper | Number of months of repayment | 360 | |||||||||
| RATE1 | Effective monthly cost | 0.5552% | (Using RATE function of excel with Nper=360,Pmt=1231,Pv=-191500,) | ||||||||
| Excel Command: RATE(360,1231,-191500) | |||||||||||
| RATE1*12 | Effective Annual Cost | 6.66% | |||||||||
| 1 | CHOICE tobe made:Choice 3 6.25% Rate,3 points | ||||||||||
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139.5 MB Problem 3 [25 points]: A house with price of $250,000 . 20% down payment, loan amount $200,000 30-year fixed r...
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