Jenna would not like to spend more than $350,000 on a house (condo), whereas peter is willing
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Question:
Assume the following information when performing your calculations:
- Purchase price $350,000 (Jenna) and $500,000 (peter)
- Down payment of 20% of purchase price Interest rate 4% 5-year Mortgage Term
- 25-year amortization
a) Even though the price tags for the houses would be $350,000 and $500,000, how much did the house actually "cost" i.e., including interest that would be paid? Explain in detail with calculations.
b) How much interest is paid for each house? Explain with calculations.
c) What happens if interest rates increase from 4% to 6%? How much interest is now paid over the life of the mortgage for each house? Explain In detail with calculations.
d) Which house ($350,000 or $500,000) would you recommend Jenna and peter and why? Explain in detail.
Related Book For
Financial Accounting and Reporting a Global Perspective
ISBN: 978-1408076866
4th edition
Authors: Michel Lebas, Herve Stolowy, Yuan Ding
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