Consider two mortgages offered today: a $480,000, 25-year fixed-rate mortgage with a 8% quoted interest rate...
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Consider two mortgages offered today: a $480,000, 25-year fixed-rate mortgage with a 8% quoted interest rate and a $480,000, 20-year fixed-rate mortgage with a 6% quoted interest rate. Prices of securities are quoted assuming no arbitrage, and hence the present value of all future cash flows for the securities are equivalent to their corresponding prices. Mortgage payments are due on a monthly basis, and late payments are fined 50% of the payment (in other words, if the payment is $100, late payments will be fined $50). A homeowner carries a $580,000, 45-year fixed-rated mortgage with a 7% quoted interest rate. Four years have past since the homeowner first took out the mortgage, and no interest rate change has occurred for this mortgage. Mortgage payments are due on a monthly basis. The homeowner has current monthly wages of $3,600, and forecast future wages to stay at exactly $3,600. To avoid fines, which mortgage should the homeowner choose to refinance the existing mortgage? $480,000, 25-year fixed-rate mortgage with a 8% quoted interest rate o $480,000, 20-year fixed-rate mortgage with a 6% quoted interest rate Consider two mortgages offered today: a $480,000, 25-year fixed-rate mortgage with a 8% quoted interest rate and a $480,000, 20-year fixed-rate mortgage with a 6% quoted interest rate. Prices of securities are quoted assuming no arbitrage, and hence the present value of all future cash flows for the securities are equivalent to their corresponding prices. Mortgage payments are due on a monthly basis, and late payments are fined 50% of the payment (in other words, if the payment is $100, late payments will be fined $50). A homeowner carries a $580,000, 45-year fixed-rated mortgage with a 7% quoted interest rate. Four years have past since the homeowner first took out the mortgage, and no interest rate change has occurred for this mortgage. Mortgage payments are due on a monthly basis. The homeowner has current monthly wages of $3,600, and forecast future wages to stay at exactly $3,600. To avoid fines, which mortgage should the homeowner choose to refinance the existing mortgage? $480,000, 25-year fixed-rate mortgage with a 8% quoted interest rate o $480,000, 20-year fixed-rate mortgage with a 6% quoted interest rate
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Financial Accounting Tools for Business Decision Making
ISBN: 978-0470239803
5th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
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