If time has value, why are financial institutions often willing to extend you a 30-year mortgage at

Question:

If time has value, why are financial institutions often willing to extend you a 30-year mortgage at a lower annual interest rate than they would charge for a one-year loan?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Money Banking and Financial Markets

ISBN: 978-0078021749

4th edition

Authors: Stephen Cecchetti, Kermit Schoenholtz

See More Books

Question Posted: Oct 02, 2014 07:53 AM

See More Questions

Why do some financial institutions remain exposed to interest rate risk, even when they believe that the use of interest rate futures could reduce their exposure?
Why does a mortgage typically have a lower interest rate than a car loan?
A 30-year mortgage has an annual interest rate of 7.18 percent and a loan amount of $180,000. What are the monthly mortgage payments?
The voltage held by a voltage regulator follows a normal random variable with a mean that equals 200 volts and a standard deviation that equals 5 volts. A regulator meets the specifications if the...
The following is a set of data from a sample of n = 5: 7 4 9 8 2 a. Compute the first quartile (Q1), the third quartile (Q3) and the interquartile range. b. List the five-number summary. c. Construct...
What is the zeroth law of thermodynamics?
An object moves with constant velocity. What can you say about the work done on a system that includes only this object? $\cdot$$\cdot$
Find the present value of the following ordinary annuities (see note to Problem 2-4): a. $400 per year for 10 years at 10 percent. b. $200 per year for 5 years at 5 percent. c. $400 per year for 5...
1. Hydrogenation of the above compound in the presence of poisoned palladium catalyst gives Me Me Me H H (a) An optically active compound (c) A racemic mixture (b) An optically inactive compound (d)...
John Henry has a small housecleaning business that currently is a sole proprietorship. The business has nine employees, annual sales of $480,000, total liabilities of $90,000, and totalassets of...
If offered the choice of receiving $1,000 today or $1,000 in one years time, which option would you choose, and why?
If 2 percent growth is your break-even point for an investment project, under which outlook for the economy would you be more inclined to go ahead with the investment: (1) A forecast for economic...
How is the amount of net investment income determined for a taxpayer with investment expenses and other noninvestment miscellaneous itemized deductions?
Explain the top 5 reasons why SCM analytics might fail in your organization? Make your assumptions to answer this question.
Today, let's delve into a critical aspect of warehouse management: resourcing a warehouse. Effective resource allocation is essential for optimizing operations and ensuring the smooth functioning of...
Create the ATM application that implements the following functions: Deposits to one of the accounts (saving, checking) Wthdraws from one of the accounts (saving, checking) Displays the balances...
A hotel offers a room rate that includes breakfast, lunch, and dinner in its restaurant. The hotel offers: b ) American Plan c ) European Plan d ) Modified American Plan a ) Incentive Plan
A guest complains that their room and incidental charges are billed together. However, their company should have paid for the guestroom. What could have resolved this problem? b ) Split folios c )...
(a) What two enthalpic factors stabilize DNA in double-helical form at low temperature? (b) What entropic factor destabilizes helical DNA at high temperature? (c) Why is the double-helical structure...
Solve for the equilibria of the following discrete-time dynamical systems Pr pt+1 = Pr+2.0(I-Pr)
What is the standard of protection that the Charter gives to privacy?
Most businesses replace their computers every two to three years. Assume that a computer costs $2,000 and that it fully depreciates in 3 years, at which point it has no resale value and is thrown...
Some friends of yours have just had a child. Thinking ahead, and realizing the power of compound interest, they are considering investing for their childs college education, which will begin in 18...
Under what circumstances might you be willing to pay more than $1,000 for a coupon bond that matures in three years, has a coupon rate of 10 percent, and a face value of $1,000?
Under what conditions would the National Building Code (N.B.C.) be used, as opposed to the Ontario Building Code (O.B.C.)?
Each month I have to lie on my expense report in order to get reimbursed for an honest business lunch," is example of?
Secondary Analysis: This week visit the Keizer Online Library and find a full-text article on secondary analysis in research. Find a full-text article, download it, highlight it, and upload it to the...

If time has value, why are financial institutions often willing to extend you a 30-year mortgage at

Question:

Step by Step Answer:

With a mortgage the house you purchase acts as collat...View the full answer

Money Banking and Financial Markets

Students also viewed these Banking questions