# Question

A facility for a production plant can be purchased for 155,000 with a down payment of 25,000. Consider the following two options

(1) Option 1; getting a new standard mortgage with a 7.5% APR and a 30-year term.

(2) Option 2; Assuming the seller's old mortgage which has an interest rate of 5.5% APR a remaining term of 25 years ( the original term was 30 years) a remaining balance of 97,218 and payments of 597 per month. You can obtain a second or the remaining balance (32,782) from your credit at 9% APR with a 10 year repayment period?

i. What is the effective interest rate of the combined mortgage?

ii. Compute the monthly payments for each option over the life of the mortgage?

iii. Compute the total interest payment for each option?

iv. What interest rate would make the two options equivalent?

(1) Option 1; getting a new standard mortgage with a 7.5% APR and a 30-year term.

(2) Option 2; Assuming the seller's old mortgage which has an interest rate of 5.5% APR a remaining term of 25 years ( the original term was 30 years) a remaining balance of 97,218 and payments of 597 per month. You can obtain a second or the remaining balance (32,782) from your credit at 9% APR with a 10 year repayment period?

i. What is the effective interest rate of the combined mortgage?

ii. Compute the monthly payments for each option over the life of the mortgage?

iii. Compute the total interest payment for each option?

iv. What interest rate would make the two options equivalent?

## Answer to relevant Questions

A student is trying to determine the half-life of radioactive iodine-131. He measures the amount, A, of iodine-131 in a sample solution every 8 hours. His data are shown in the table.(a) Find an appropriate exponential ...Which investment would you rather own: (a) Investment A is 12% annually; (b) Investment B is 11.9% semiannually; (c) Investment C is 11.8% quarterly; (d) Investment D is 11.7% dailyTuition is #1,769 will be due when the spring term begins in 4 months. What amount should a student deposit today, at 3.25% to have enough to pay the tuition?Find the present value of the following future amounts: If money can be invested at 6% compounded annually, which is larger, $10,000 now or $15,000 in 6 years? Use present value to decide.You borrow $165,000 to buy a house. The mortgage rate is 4.5 percent and the loan period is 30 years. Payments are made monthly. If you pay the mortgage according to the loan agreement, how much total interest will you pay?Post your question

0