A borrower has been analyzing different adjustable rate mortgage (ARM) alternatives for the purchase of a property. The borrower anticipates owning the property for five years. The lender first offers a $157,000, 30-year fully amortizing ARM with the following terms: Initial interest rate - 6 percent Index 1-year Treasuries Payments reset each year Margin-2 percent Interest rate cap - None Payment cap = None Negative amortization - Not allowed Discount points=2 percent Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOM) 2-7 percent; (BOY) 3-8.5 percent; (BOY) 4-9.5 percent; (BOM) 5-11 percent. Required: a. Compute the payments and loan balances for the unrestricted ARM for the five-year period. b. Compute the yield for the unrestricted ARM for the five-year period. Complete this question by entering your answers in the tabs below. Required A Required B Compute the yield for the unrestricted ARM for the five-year period. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places, Yield < Required A Beques B

A borrower has been analyzing different adjustable rate mortgage (ARM) alternatives for the purchase of a property. The borrower anticipates owning the property for five years. The lender first offers a $157,000, 30-year fully amortizing ARM with the following terms: Initial interest rate - 6 percent Index 1-year Treasuries Payments reset each year Margin-2 percent Interest rate cap - None Payment cap = None Negative amortization - Not allowed Discount points=2 percent Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOM) 2-7 percent; (BOY) 3-8.5 percent; (BOY) 4-9.5 percent; (BOM) 5-11 percent. Required: a. Compute the payments and loan balances for the unrestricted ARM for the five-year period. b. Compute the yield for the unrestricted ARM for the five-year period. Complete this question by entering your answers in the tabs below. Required A Required B Compute the yield for the unrestricted ARM for the five-year period. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places, Yield < Required A Beques B

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 12P

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Similar questions

A borrower has been analyzing different adjustable rate mortgage (ARM) alternatives for the purchase of a property. The borrower anticipates owning the property for five years. The lender first offers a $150,000, 30-year fully amortizing ARM with the following terms: Initial interest rate = 6 percentIndex = 1−year TreasuriesPayments reset each yearMargin = 2 percentInterest rate cap = NonePayment cap = NoneNegative amortization = Not allowedDiscount points = 2 percent Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOY) 2 = 7 percent; (BOY) 3 = 8.5 percent; (BOY) 4 = 9.5 percent; (BOY) 5 = 11 percent. Required: a. Compute the payments and loan balances for the unrestricted ARM for the five-year period. b. Compute the yield for the unrestricted ARM for the five-year period.
A borrower has been analyzing different adjustable-rate mortgage (ARM) alternatives for the purchase of a property. The borrower anticipates owning the property for five years. The lender first offers a $150,000, 30-year fully amortizing ARM with the following terms:Initial interest rate 6 percentIndex 1-year TreasuriesPayments reset each yearMargin 2 percentInterest rate cap NonePayment cap NoneNegative amortization Not allowedDiscount points 2 percentBased on estimated forward rates, the index to which the ARM is tied is forecasted as follows:Beginning of year (BOY) 2 7 percent; (BOY) 3 8.5 percent; (BOY) 4 9.5 percent; (BOY) 5 11 percent.Compute the payments, loan balances, and yield for the unrestricted ARM for the five-year period.
A partially amortizing mortgage is made for $62,000 for a term of 10 years. The borrower and lender agree that a balance of $20,400 will remain and be repaid as a lump sum at that time. Required: a. If the interest rate is 7 percent, what must monthly payments be over the 10-year period? b. If the borrower chooses to repay the loan after five years instead of at the end of year 10, what must the loan balance be? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
A partially amortizing mortgage is made for $75,000 for a term of 10 years. The borrower and lender agree that a balance of $23,000 will remain and be repaid as a lump sum at that time.Required: a. If the interest rate is 7 percent, what must monthly payments be over the 10-year period? b. If the borrower chooses to repay the loan after five years instead of at the end of year 10, what must the loan balance be
Assume that a borrower is expected to prepay a loan at the end of Year 5. Based on the following loan information on the fully-amortized fixed rate mortgage what is the effective cost of borrowing of Loan C? (choose the closest answer) Financial Calculator 1: Financial Calculator 2 Loan Amount Maturity Contract interest rate Upfront fees Upfront mortgage Insurance fee Prepayment after Year Effective Cost of Borrowing 86.79 7AN Loan C $200,000 30 years 6.25% 3% 1.6% 5 Quiz Score: 8 o
A partially amortizing mortgage is made for $50,000 for a term of 10 years. The borrower and lender agree that a balance of 20,000 will remain and be repaid as a lump sum at that time. 1- If the interest rate is 7 percent. what must monthly payments be over the 10-year period 2- the borrower chooses to repay loan after 5 years instead of at the end of year 10, what must the loan balance be:
A property is available for sale that could normally be financed with a fully amortizing $81,200 loan at a 10 percent rate with monthly payments over a 25-year term. Payments would be $737.87 per month. The builder is offering buyers a mortgage that reduces the payments by 50 percent for the first year and 25 percent for the second year. After the second year, regular monthly payments of $737.87 would be made for the remainder of the loan term. Required: a. How much would you expect the builder to have to give the bank to buy down the payments as indicated? b. Would you recommend the property be purchased if it was selling for $5,000 more than similar properties that do not have the buydown available? Complete this question by entering your answers in the tabs below. Required A Required B How much would you expect the builder to have to give the bank to buy down the payments as indicated? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Down…
You plan to purchase a $240,000 house using a 30-year mortgage obtained from your local credit union. The mortgage rate offered to you is 8 percent. You will make a down payment of 10 percent of the purchase price. a. Calculate your monthly payments on this mortgage. b. Construct the amortization schedule for the first six payments. Complete this question by entering your answers in the tabs below. Required A Required B Construct the amortization schedule for the first six payments. (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16)) Amortization Schedule for first 6 payments (months) Month Beginning Loan Balance Payment Interest Principal Ending Loan Balance 1 2 3 4 5 6
Suppose you are interested in taking an FHA mortgage loan for $250,000 in order to purchase your principal residence. In order to do so, you must pay an additional up-front mortgage insurance premium (UFMIP) of 1.0% of the mortgage balance. If the interest rate on the fully-amortizing mortgage loan is 5% and the term is 30 years and the UFMIP is financed (i.e., it is included in the loan amount), what is the dollar portion of your monthly mortgage payment that is designated to cover the UFMIP? A. $2,500.00B. $1,119.41C. $159.67D. $13.42
A property is available for sale that could be financed with a fully amortizing $250,000 loan at 8% with a monthly payment over 30 years. The builder is offering buyers a mortgage that reduces the payment by 20% for first and second year. After the second year, regular payment would be made for the remainder of the loan term. What is the first-year monthly payment for buyer? 1467.53 1657.32 1723.56
Given the following information on two fixed-rate fully amortized mortgages and consider the refinancing decision of the old loan at the end of Year 10. Loan Amount Loan Term Fully Amortized Interest Rate Origination Fee Prepayment Penalty Old Loan 4,000,000 30 years Yes 7% 3% 7% New Loan 20 years Yes 5.5% 4% 3% What is the refinancing cost at the end of Year 10? (choose the closest answer) $206,000 $240,000 $343,000 $378,000
A property is available for sale that could normally be financed with a fully amortizing $80,200 loan at a 10 percent rate with monthly payments over a 25-year term. Payments would be $728.78 per month. The builder is offering buyers a mortgage that reduces the payments by 50 percent for the first year and 25 percent for the second year. After the second year, regular monthly payments of $728.78 would be made for the remainder of the loan term. Required: a. How much would you expect the builder to have to give the bank to buy down the payments as indicated? b. Would you recommend the property be purchased if it was selling for $5,000 more than similar properties that do not have the buydown available?