Saeed is considering buying a $200,000 flat in a Beirut suburb. He will pay for this...

 

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Saeed is considering buying a $200,000 flat in a Beirut suburb. He will pay for this apartment through a loan from Bank M that will cover the whole price at an interest rate of 6% per year, compounded monthly. Saeed will pay back the apartment price in equal monthly installments for 20 years. (a) What is Saeed's monthly payment? (b) Suppose after four years of taking the loan, Saeed decided to pay back the remaining loan amount early. How much would he pay? (c) Suppose after two years of taking the loan, the interest rate dropped to 4% per year compounded monthly. What is Saeed's new monthly payment? (d) Suppose one year after taking the loan, and in a rare moment of enlightenment, the Lebanese government decided to consider the interest paid during the past year on home mortgages as tax- deductible. Saeed was told to wait for a tax-refund check in February. What will be the check value? Saeed's is in the 12.5% income tax bracket. Saeed is considering buying a $200,000 flat in a Beirut suburb. He will pay for this apartment through a loan from Bank M that will cover the whole price at an interest rate of 6% per year, compounded monthly. Saeed will pay back the apartment price in equal monthly installments for 20 years. (a) What is Saeed's monthly payment? (b) Suppose after four years of taking the loan, Saeed decided to pay back the remaining loan amount early. How much would he pay? (c) Suppose after two years of taking the loan, the interest rate dropped to 4% per year compounded monthly. What is Saeed's new monthly payment? (d) Suppose one year after taking the loan, and in a rare moment of enlightenment, the Lebanese government decided to consider the interest paid during the past year on home mortgages as tax- deductible. Saeed was told to wait for a tax-refund check in February. What will be the check value? Saeed's is in the 12.5% income tax bracket.

Answer rating: 100% (QA)

a To calculate Saeeds monthly payment we can use the formula for the monthly payment of a loan PMT P r 1 rn 1 rn 1 Where PMT is the monthly payment P ... View the full answer