Concept explainers
(a)
The value of
Answer to Problem 89P
The value of
Explanation of Solution
Given:
The amount is
Time period is
Loan origination fees is
Concept used:
Write the expression to calculate the monthly payments.
Here, the rate for loan is
Calculation:
Calculate the total amount of mortgage with points.
Calculate the time period in term of months.
Calculate the rate of interest for one month.
Calculate the monthly payments with points.
Substitute
Mortgage amount without points is
Calculate the
Substitute
Calculate the value of
Conclusion:
Thus, the value of
(b)
The value of
Answer to Problem 89P
The value of
Explanation of Solution
Given:
The amount is
Time period is
Loan origination fees is
Concept used:
Write the expression to calculate the monthly payments.
Here, the rate for loan is
Calculation:
Calculate the total amount of mortgage with points.
Calculate the time period in term of months.
Calculate the rate of interest for one month.
Calculate the monthly payments with points.
Substitute
Mortgage amount without points is
Calculate the
Substitute
Calculate the value of
Conclusion:
Thus, the value of
(c)
The graph of effective interest rate.
Answer to Problem 89P
The graph of effective interest and time is shown below.
Explanation of Solution
Given:
Amount is
Time period is
Loan origination fees is
Calculation:
The following table shows the value of time and effective interest rate.
Time to pay off mortgage | Effective interest rate |
Plot the graph of effective interest and time as shown below.
Graph-(1).
Conclusion:
The graph of effective interest and time is shown below.
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Chapter 7 Solutions
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