Luke is buying a house. The price is $500,000. The down payment required by the bank is

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Luke is buying a house. The price is $500,000. The down payment required by the bank is $100,000 (20% of the purchase price.) For the remaining balance of $400,000, the bank offers Luke a 30 year mortgage at a rate of 6% p.a. monthly compounding.

What is the monthly payment Luke has to send to the bank every month over the next 30 years?

A second bank offers Luke a 15-year mortgage at a rate of 5% p.a., monthly compounding. This bank asks for a $125,000 down payment.

Which offer is optimal for Luke, assuming his opportunity cost of capital is 8% p.a. monthly compounding?

Related Book For answer-question

A Survey of Mathematics with Applications

ISBN: 978-0134112107

10th edition

Authors: Allen R. Angel, Christine D. Abbott, Dennis Runde

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Posted Date: Mar 20, 2023 02:01 AM

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Luke is buying a house. The price is $500,000. The down payment required by the bank is

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To calculate the monthly payment Luke has to make for the first offer we can use the formula for a f... View the full answer

A Survey of Mathematics with Applications

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