The buyer of a piece of real estate is often given the option of buying down...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The buyer of a piece of real estate is often given the option of buying down the loan. This option gives the buyer a choice of loan terms in which various combinations of interest rates and discount points are offered. The choice of how many points and what rate is optimal is often a matter of how long the buyer intends to keep the property. Darrell Frye is planning to buy an office building at a cost of $983,000. He must pay 10% down and has a choice of financing terms. He can select from a 9% 30-year loan and pay 4 discount points, a 9.25% 30-year loan and pay 3 discount points, or a 9.5% 30-year loan and pay 2 discount points. Darrell expects to hold the building for three years and then sell it. Except for the three rate and discount point combinations, all other costs of purchasing and selling are fixed and identical. (Round your answers to the nearest cent. Use this table, if necessary.) (a) What is the amount being financed? $ 884,700 (b) If Darrell chooses the 4-point 9% loan, what will be his total outlay in points and payments after 36 months? $ (c) If Darrell chooses the 3-point 9.25% loan, what will be his total outlay in points and payments after 36 months? $ (d) If Darrell chooses the 2-point 9.5% loan, what will be his total outlay in points and payments after 36 months? $ (e) of the three choices for a loan, which results in the lowest total outlay for Darrell after 36 months? the 4-point 9% loan the 3-point 9.25% loan the 2-point 9.5% loan The buyer of a piece of real estate is often given the option of buying down the loan. This option gives the buyer a choice of loan terms in which various combinations of interest rates and discount points are offered. The choice of how many points and what rate is optimal is often a matter of how long the buyer intends to keep the property. Darrell Frye is planning to buy an office building at a cost of $983,000. He must pay 10% down and has a choice of financing terms. He can select from a 9% 30-year loan and pay 4 discount points, a 9.25% 30-year loan and pay 3 discount points, or a 9.5% 30-year loan and pay 2 discount points. Darrell expects to hold the building for three years and then sell it. Except for the three rate and discount point combinations, all other costs of purchasing and selling are fixed and identical. (Round your answers to the nearest cent. Use this table, if necessary.) (a) What is the amount being financed? $ 884,700 (b) If Darrell chooses the 4-point 9% loan, what will be his total outlay in points and payments after 36 months? $ (c) If Darrell chooses the 3-point 9.25% loan, what will be his total outlay in points and payments after 36 months? $ (d) If Darrell chooses the 2-point 9.5% loan, what will be his total outlay in points and payments after 36 months? $ (e) of the three choices for a loan, which results in the lowest total outlay for Darrell after 36 months? the 4-point 9% loan the 3-point 9.25% loan the 2-point 9.5% loan
Expert Answer:
Related Book For
Posted Date:
Students also viewed these accounting questions
-
The probability distribution of the return on an investment in Omega Inc.s common stock follows. Return Probability 5% .............0.05 8 ..............0.25 10 .............0.40 12...
-
The objective of a community research project is to determine whether women are more community conscious before marriage or after 5 years of marriage. A test designed to measure community...
-
Explain why the realized return on an investment in a bond may not equal the yield to maturity.
-
(a) Decide whether each of the following expressions are true or not. Answer yes or no. In any case where it is not true, provide the actual O-complexity. (i) log n = O(n!) (ii) 10! = O(log n) (iii)...
-
The weekly time (in hours) spent weight lifting for 16 randomly selected college football players Use the data set to (a) Find the sample mean, (b) Find the sample standard deviation, (c) Construct a...
-
Dennison agreed to purchase land from Harden with the understanding that the land contained fruit trees. To prove that there were fruit trees on the property, Harden provided nursery reports stating...
-
Connor Health Foods has 10,000 shares of \(\$ 1\) par common stock outstanding, which was issued at \(\$ 10\) per share. Connor also has retained earnings of \(\$ 80,000\). How much is Connor's total...
-
Sandy Edge is president of Edge File Works, a firm that manufactures two types of metal file cabinets. The demand for the two-drawer model is 650 cabinets per week; demand for the three- drawer...
-
THREE i. Calculate the value of Macaulay's duration for a 10-year, $1000 par value bond purchased today at a yield to maturity of 14% and a coupon rate of 10%. (6 marks) ii. From the answer in (i)...
-
Benito Mendez opened Mendez Appraisals. He rented office space and has a part-time secretary to answer the telephone and make appraisal appointments. His chart of accounts is as follows: Mendezs...
-
Joe Bums dies Without a Will. After all debts are cleared, his estate amounts to $120,000. Bums is survived by his Wife and three daughters. How much money will each of the daughters receive?
-
Flounder Industries manufactures dining chairs and tables. The following information is available regarding the two products and their estimated use of cost drivers: Dining Chairs Tables Estimated...
-
Kropf Incorporated has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct...
-
Explain how you would implement empathy mapping for that HomeToGo to facilitate growth similar to Airbnb.
-
Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Incorporated, to dispense frozen yogurt products under The Yogurt Place name. Mr. Swanson has assembled the following...
-
PROBLEM 3 In this problem, we redesign the inventory program for Trish's bookstore using dictionaries. Note: We will be continuing this redesign in Lab 10. Copy the starter code Lab09P3-starter.py to...
-
Complex Exponential Fourier series coefficients of a real and periodic signal for n 0 is given as; n D 0 1 The period is, To = 1 2 2-j 3+4j 3 1-2j 4 0 .00 0 1 sec. Construct the periodic signal x(t)...
-
The words without recourse on an indorsement means the indorser is: a. not liable for any problems associated with the instrument. b. not liable if the instrument is dishonored. c. liable personally...
-
The Greenbay Motor Company ordered six German-built engines at 15,000 each when the direct exchange rate was $1.2500 per euro and elected not to cover the obligation with a forward contract. When the...
-
Why the profitability index is more appropriately described as a variation on the NPV technique than as a variation on the IRR technique?
-
You are a financial analyst for the Ajax Company, which uses about $1 million of inventory per month. The purchasing manager has come to you for help with a buying decision. He can get a big discount...
-
a. Nonlinearity in mass b. Nonlinearity in damping c. Linear equation d. Nonlinearity in spring \(\ddot{x}+f \frac{\dot{x}}{|\dot{x}|}+\omega_{n}^{2} x=0\)
-
The equation of motion of a nonlinear system is given by \[\ddot{x}+c \dot{x}+k_{1} x+k_{2} x^{2}=a \cos 2 \omega t\] Investigate the subharmonic solution of order 2 for this system.
-
Prove that, for the system considered in Section 13.5.1, the minimum value of \(\omega^{2}\) for which the amplitude of subharmonic oscillations \(A\) will have a real value is given by...
Study smarter with the SolutionInn App