Say that you purchase a house for $230,000 by getting a mortgage for $205,000 an
ID: 2757783 • Letter: S
Question
Say that you purchase a house for $230,000 by getting a mortgage for $205,000 and paying a $25,000 down payment. If you get a 25-year mortgage with a 8 percent interest rate, what are the monthly payments? (Do not round intermediate calculations and round your final answer to 2 decimal places.) (PMT)
What would the loan balance be in ten years? (Round the payment amount to the nearest cent but do not round any other interim calculations. Round your final answer to 2 decimal places.) (PVA)
If the house appreciates at 4 percent per year, what will be the value of the house in ten years? (Do not round intermediate calculations and round your final answer to 2 decimal places.) (FV)
How much of this value is your equity? (Do not round intermediate calculations and round your final answer to 2 decimal places.) (EQUITY)
Your client has been given a trust fund valued at $1.63 million. She cannot access the money until she turns 65 years old, which is in 20 years. At that time, she can withdraw $18,500 per month.
If the trust fund is invested at a 3.5 percent rate, compounded monthly, how many months will it last your client once she starts to withdraw the money? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Say that you purchase a house for $230,000 by getting a mortgage for $205,000 and paying a $25,000 down payment. If you get a 25-year mortgage with a 8 percent interest rate, what are the monthly payments? (Do not round intermediate calculations and round your final answer to 2 decimal places.) (PMT)
What would the loan balance be in ten years? (Round the payment amount to the nearest cent but do not round any other interim calculations. Round your final answer to 2 decimal places.) (PVA)
If the house appreciates at 4 percent per year, what will be the value of the house in ten years? (Do not round intermediate calculations and round your final answer to 2 decimal places.) (FV)
How much of this value is your equity? (Do not round intermediate calculations and round your final answer to 2 decimal places.) (EQUITY)
Your client has been given a trust fund valued at $1.63 million. She cannot access the money until she turns 65 years old, which is in 20 years. At that time, she can withdraw $18,500 per month.
If the trust fund is invested at a 3.5 percent rate, compounded monthly, how many months will it last your client once she starts to withdraw the money? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Explanation / Answer
a)
Monthly payments = pmt(rate,nper,pv,fv)
rate = 8%/12 = 2%/3
nper = 25*12 = 300
pv = 205000
fv = 0
Monthly payments = pmt(2%/3,300,-205000,0)
Monthly payments = $ 1582.22
b)
Loan balance be in ten years = pv(rate,nper,pmt,fv)
rate = 8%/12 = 2%/3
nper = (25-10)*12 = 180
pmt = 1582.22325
fv = 0
Loan balance be in ten years = pv(2%/3,180,-1582.22325,0)
Loan balance be in ten years = $ 165,564.78
c)
Value of the house in ten years = 230000*(1+4%)^10
Value of the house in ten years = 340,456.19
d)
value is your equity = 340456.19-165564.78
value is your equity = $ 174,891.41
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