Currently, 15-year mortgage rate is 5.30% (with monthly payments); and 30-year mortgage rate is 6.35% (with...

 

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Currently, 15-year mortgage rate is 5.30% (with monthly payments); and 30-year mortgage rate is 6.35% (with monthly payments). Consider a house with a price of $400,000. a. Compare these two rates in terms of total interest expense, monthly payments. b. How much total interest expense will be saved for both rates, if you also make a down payment of $20,000? c. Instead of buying the house, if you save the monthly payments on a Treasury bond with annual coupons that earns a YTM of 4%, how much money would you have in the future (at the time of your last payment)? Currently, 15-year mortgage rate is 5.30% (with monthly payments); and 30-year mortgage rate is 6.35% (with monthly payments). Consider a house with a price of $400,000. a. Compare these two rates in terms of total interest expense, monthly payments. b. How much total interest expense will be saved for both rates, if you also make a down payment of $20,000? c. Instead of buying the house, if you save the monthly payments on a Treasury bond with annual coupons that earns a YTM of 4%, how much money would you have in the future (at the time of your last payment)?

Answer rating: 100% (QA)

a To compare the two rates in terms of total interest expense and monthly payments lets calculate the details for each mortgage 15year mortgage Loan a... View the full answer