2024 – PROBLEMS 13 For the following loan make a table showing the
FINANCE 4 PROBLEMS – 2024
2024 – PROBLEMS 13 For the following loan make a table showing the.
PROBLEMS :
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Table showing
13. For the following loan, make a table showing the amount of each monthly payment that goes toward principal and interest for the first three months of the loan.
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Home mortgage
A home mortgage of $164,000 with a fixed APR of 3% for 30 years. (Round the final answers to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)
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Month 1:
Interest: ____
>payment
Payment towards principal: ____
____
New Principal: ____
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Month 2:
Interest: ____
>payment
Payment towards principal: ____
____
New Principal: ____
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Month 3:
Interest: ____
>payment
Payment towards principal: ____
____
New Principal: ____
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30-year fixed rate loan
25. You can afford monthly payments of $800. If current mortgage rates are 3.93% for a 30-year fixed rate loan, how much can you afford to borrow?
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How much can you afford to borrow? $______ (round to nearest dollar)
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Loan payment formula
If you are required to make a 10% down payment and you have the cash on hand to do it, how expensive a home can you afford? (Hint: You will need to solve the loan payment formula for P.)
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How expensive a home can you afford? $______ (round to nearest dollar)
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24. You have a choice between a 30-year fixed rate loan at 6.5% and an adjustable rate mortgage (ARM) with a first year rate of 2%. Neglecting compounding and changes in principal, estimate your monthly savings with the ARM during the first year on a $225,000 loan.
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Approximate monthly savings
What is the approximate monthly savings with the ARM during the first year? $____ (round to nearest dollar)
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Suppose that the ARM rate rises to 11.5% at the start of the third year. Approximately how much extra will you then be paying over what you would have paid if you had taken the fixed rate loan?
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How much extra $_____ (round to nearest dollar)
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20. Compare the monthly payments and total loan costs for the following pairs of loan options. Assume that both loans are fixed rate and have the same closing costs. You need a $30,000 loan.
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Option 1: a 30-year loan at an APR of 7.65%.
Option 2: a 15-year loan at an APR of 7.25%.
Find the monthly payment for each option.
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The monthly payment for option 1 is $ _______
The monthly payment for option 2 is $ _______
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Total loan costs for option 1 $ ______
Total loan costs for option 2 $ ______
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(Do not round until the final answer. Then round to the nearest cent as needed.)
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