Questions 1 2 3 4 A few years out of UCCS and you're earning a salary...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Questions 1 2 3 4 A few years out of UCCS and you're earning a salary of $125,000 and decide to buy your first condominium (a condominium, or condo, is just an apartment that you own). The condo will cost $300,000. The bank requires a 15% down payment, and will lend you the difference in a 4.80% (M) traditional 30yr mortgage. Your First Home: Chapter One (day one) 5 What is the value of your home equity the day you buy the condo? What is your monthly payment? What is the total amount of interest you will pay in the first year (i.e. months 1-12)? What is your taxable income at the end of the first year, for computing your tax liability (remember: mortgage interest is tax-deductible, so your taxable income is salary minus total interest paid for the year)? If your effective tax rate is 25%, how much are you saving in taxes this first year (compared to not having tax- deductible interest)? $45,000 $1,337.90 $12,154.95 $112,846 $3,038.5 Your First Home: Chapter Two (end of year three) For three years from the day you bought the condo, Colorado real estate continues to climb. Your condo appreciates 4% every year for three years. And, interest rates fall to 3.60%(M). You decide to refinance your mortgage. You can refinance into a new mortgage for (again) 85% of the value of the condo. Questions 6 7 8 9 10 11 What is the value of your condo at the end of year three? Before you refinance, what is the principal balance you owe on the mortgage at the end of year three (i.e. month 36)? What is the new loan amount (i.e. new principal balance) for the new mortgage? What is the new monthly payment you'll be making on the new mortgage? What is the total amount of interest you will pay in the first year (i.e. months 1-12 on new mtge)? You paid off the original mortgage principal balance, taking out a new mortgage with a higher principal balance, how cash did you receive after paying off the original mortgage? 3 Your First Home: Chapter Three (end of year ten) Now seven more years have passed, a total of ten years since you bought the condo. The real estate market slowed down and then it crashed. For the next 6 years, your condo appreciated at 1% per year, but then over-building finally caught up with Colorado and in year 10 the housing market fell 20%. You pay a broker a 5% commission to sell the condo. You also have closing costs of $2,500. Questions 12 13 14 15 What is the value (sale price) of your condo at the end of year ten? Hint: it's worth less than you paid for it. Inclusive of the realtor commission and closing costs, what cash do you receive upon sale? What is the principal balance you owe on the mortgage at the end of year ten? (Hint: be careful here... It's 10 years since you bought the condo, but you refinanced to a new mtge at the end of year three... so be careful: how many months have passed on this new mortgage?) You sell the condo, receive cash (question 13) and pay off the mortgage (question 14). How much cash do you have left after the sale? Questions 16 Your First Home: Chapter Four (still end of year ten) Now, you wonder, how good of an investment was this condo over these ten years? 17 18 19 20 Assume that at the end of year three when you refinanced your mortgage, and you received cash then, you put that extra cash in a savings account earning 3.00% (A). What is the total amount of cash you have now, in year 10 (i.e. 7 years later), from that deposit? When you sold the condo at the end of year 10, you received cash after paying off the loan, what was the value of that cash (question 15)? What is the total amount of cash in your hands at the end of year ten (i.e. sum of the answers to questions 16 & 17). When you bought the condo ten years ago, you had to pay a down payment, how much was the original down payment? You made an initial cash outflow (the down payment, question 19) and ten years later had cash in the bank (total cash, question 18). Your initial investment is PV, the final cash back is FV, and 10 years passed. What was the % return each year? Using TVM, solve for annual I (to three decimal places). 5 Questions 1 2 3 4 A few years out of UCCS and you're earning a salary of $125,000 and decide to buy your first condominium (a condominium, or condo, is just an apartment that you own). The condo will cost $300,000. The bank requires a 15% down payment, and will lend you the difference in a 4.80% (M) traditional 30yr mortgage. Your First Home: Chapter One (day one) 5 What is the value of your home equity the day you buy the condo? What is your monthly payment? What is the total amount of interest you will pay in the first year (i.e. months 1-12)? What is your taxable income at the end of the first year, for computing your tax liability (remember: mortgage interest is tax-deductible, so your taxable income is salary minus total interest paid for the year)? If your effective tax rate is 25%, how much are you saving in taxes this first year (compared to not having tax- deductible interest)? $45,000 $1,337.90 $12,154.95 $112,846 $3,038.5 Your First Home: Chapter Two (end of year three) For three years from the day you bought the condo, Colorado real estate continues to climb. Your condo appreciates 4% every year for three years. And, interest rates fall to 3.60%(M). You decide to refinance your mortgage. You can refinance into a new mortgage for (again) 85% of the value of the condo. Questions 6 7 8 9 10 11 What is the value of your condo at the end of year three? Before you refinance, what is the principal balance you owe on the mortgage at the end of year three (i.e. month 36)? What is the new loan amount (i.e. new principal balance) for the new mortgage? What is the new monthly payment you'll be making on the new mortgage? What is the total amount of interest you will pay in the first year (i.e. months 1-12 on new mtge)? You paid off the original mortgage principal balance, taking out a new mortgage with a higher principal balance, how cash did you receive after paying off the original mortgage? 3 Your First Home: Chapter Three (end of year ten) Now seven more years have passed, a total of ten years since you bought the condo. The real estate market slowed down and then it crashed. For the next 6 years, your condo appreciated at 1% per year, but then over-building finally caught up with Colorado and in year 10 the housing market fell 20%. You pay a broker a 5% commission to sell the condo. You also have closing costs of $2,500. Questions 12 13 14 15 What is the value (sale price) of your condo at the end of year ten? Hint: it's worth less than you paid for it. Inclusive of the realtor commission and closing costs, what cash do you receive upon sale? What is the principal balance you owe on the mortgage at the end of year ten? (Hint: be careful here... It's 10 years since you bought the condo, but you refinanced to a new mtge at the end of year three... so be careful: how many months have passed on this new mortgage?) You sell the condo, receive cash (question 13) and pay off the mortgage (question 14). How much cash do you have left after the sale? Questions 16 Your First Home: Chapter Four (still end of year ten) Now, you wonder, how good of an investment was this condo over these ten years? 17 18 19 20 Assume that at the end of year three when you refinanced your mortgage, and you received cash then, you put that extra cash in a savings account earning 3.00% (A). What is the total amount of cash you have now, in year 10 (i.e. 7 years later), from that deposit? When you sold the condo at the end of year 10, you received cash after paying off the loan, what was the value of that cash (question 15)? What is the total amount of cash in your hands at the end of year ten (i.e. sum of the answers to questions 16 & 17). When you bought the condo ten years ago, you had to pay a down payment, how much was the original down payment? You made an initial cash outflow (the down payment, question 19) and ten years later had cash in the bank (total cash, question 18). Your initial investment is PV, the final cash back is FV, and 10 years passed. What was the % return each year? Using TVM, solve for annual I (to three decimal places). 5
Expert Answer:
Answer rating: 100% (QA)
15 downpayment 300000 15 45000 Therefore a loan of 255000 was taken initially The val... View the full answer
Related Book For
Quantitative Methods for Business
ISBN: 978-0840062345
12th edition
Authors: David Anderson, Dennis Sweeney, Thomas Williams, Jeffrey Cam
Posted Date:
Students also viewed these general management questions
-
A real estate investor is interested in purchasing condominium property in Naples, Florida. The three most preferred condominiums are listed along with criteria weights and rating information. Which...
-
Condo King (CK) is building a luxury condominium for a contract price of $60,000,000. This is estimated to be a three-year project with an estimated cost of $48,000,000. CK uses the...
-
A few years ago, a construction manager earning $70,000 per year working for a regional home builder decided to open his own home building company. He took $100,000 out of one of his investment...
-
A double-ended queue or deque (pronounced "deck") is a collection that is a combination of a stack and a queue. Write a class Deque that uses a linked list to implement the following API: public...
-
Multiple Choice Questions 1) The following information is available for product N6. Direct material costs ........................ $67.00 per unit of product Costs of machining...
-
During which of the labeled phases of the experiment would the cell undergo anaphase? (A) Phase A (B) Phase B (C) Phase C (D) Phase D An experiment is performed to evaluate the amount of DNA present...
-
At a stage of reaction turbine, the mean diameter of rotor is \(1.4 \mathrm{~m}\). the speed ratio is 0.7. Determine the blade inlet angle if the blade outlet angle is \(20^{\circ}\). The rotor speed...
-
Wilken's Sandwich Shop maintains three separate menus for breakfast, lunch, and dinner. Gross margin computations for the three menu lines for 2012 are as follows:
-
After being business for 8 years, a customer gets scalded when a server accidentally spills hot espresso on them. The customer successfully sues your BizCafe for $200,000. How would this be handled...
-
On January 1. Ruiz Company issued bonds as follows: Face Value: Number of Years: Stated Interest Rate: Interest payments per year 500,000 15 7% Required: 1) Calculate the bond selling price given the...
-
According to leadership substitutes theory, which of the following is a potential substitute for people-oriented leadership? Multiple Choice self-leadership performance-based rewards enjoyable work...
-
Today, you invested $ 1 , 0 0 0 in an investment with a promised rate of return of 1 2 % APR with weekly compounding. You plan to sell this investment in 2 0 years. How many weeks will your money be...
-
The purpose of this lab assignment is Problem Statement: 1. In Project 1, you will write a program to simulate a simple game named Nim: two players alternately take marbles from a pile. In each...
-
if you deposit $ 3 , 0 0 0 at the end of each quarter into an account which earns 1 0 % APR compounded monthlyhow much will be in this account after 3 years
-
(b) Fig. 1 illustrates the evolution of TCP's congestion window (cwnd). The unit of time (on the x-axis) is equal to the Round Trip Time (RTT). Reconstruct the sequence of events that explains TCP's...
-
Cash and cash equivalents Deposits Marketable securities Inventory Property & equipment, net Loan to shareholders Notes receivable Trade accounts receivable TOTAL ASSETS Sales tax payable Retained...
-
If f(x) = 2x3 - 4x2 + 4x + C and F(2) = 6, what is the value of C?
-
Determine the optimal use of Applichem's plant capacity using the Solver in Excel.
-
Open the workbook OM455. Save the file under a new name, OM455COUNTIF.xls. Suppose we wish to automatically count the number of each letter grade. a. Begin by putting the letters A, B, C, D, and F in...
-
A random variable x is uniformly distributed between 1.0 and 1.5. a. Show the graph of the probability density function. b. Find P(x = 1.25). c. Find P(1.0 x 1.25). d. Find P(1.20 < x < 1.5).
-
The following examples are experiments and their associated random variables. In each case identify the values the random variable can assume and state whether the random variable is discrete or...
-
Describe the working of a Carnot cycle.
-
Define thermal efficiency of a heat engine.
-
What are the limitations of Carnot cycle?
Study smarter with the SolutionInn App