You are borrowing $250,000 to buy a house, using a standard, 30-year mortgage. Your mortgage lender...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You are borrowing $250,000 to buy a house, using a standard, 30-year mortgage. Your mortgage lender offers a 5.50% mortgage with no points, or an X% mortgage with 0.80 points. You plan on living in the house for exactly 31 months, paying only the required payment each month, and without refinancing your mortgage. What rate for the mortgage with points will make you indifferent between the two mortgages? Calculate a nominal rate, with monthly compounding. Use the 5.50% rate to discount cash flows between the two options. Note: all rates in the problem are nominal annual rates with monthly compounding. Recall, 1 point is 1% of the mortgage. Enter your answer in decimal format, to 4 decimal places, truncated. For example, if your answer is 5.518%, answer "0.0551". You are borrowing $250,000 to buy a house, using a standard, 30-year mortgage. Your mortgage lender offers a 5.50% mortgage with no points, or an X% mortgage with 0.80 points. You plan on living in the house for exactly 31 months, paying only the required payment each month, and without refinancing your mortgage. What rate for the mortgage with points will make you indifferent between the two mortgages? Calculate a nominal rate, with monthly compounding. Use the 5.50% rate to discount cash flows between the two options. Note: all rates in the problem are nominal annual rates with monthly compounding. Recall, 1 point is 1% of the mortgage. Enter your answer in decimal format, to 4 decimal places, truncated. For example, if your answer is 5.518%, answer "0.0551".
Expert Answer:
Related Book For
Posted Date:
Students also viewed these accounting questions
-
A young couple decides to save to buy a house in 5 years, whose value on that date will be $25,000. They will make quarterly deposits in equal installments, starting in 3 months. The bank recognizes...
-
You want to buy a house that costs $100,000. You have $10,000 for a down payment, but your credit is such that mortgage companies will not lend you the required $90,000. However, the realtor...
-
You want to buy a house for which the owner is asking $625,000. The only problem is that the house is leased to someone else with five years remaining on the lease. However, you like the house and...
-
Evaluate each expression if possible. (-3)4
-
What are the advantages of organizing data storage using a database approach?
-
Use the Hungarian method to obtain a plan that will minimize total processing cost in the following table under these conditions: a. The combination 2-D is undesirable. b. The combinations 1-A and...
-
A manufacturer of smart phones has the following probability distribution for the number of defects per phone: (a) Determine the probability of 2 or more defects. (b) Is a randomly selected phone...
-
Visic Corporation, a manufacturing company, produces a single product. The following information has been taken from the companys production, sales, and cost records for the just completed year. The...
-
In a free floating exchange rate regime, the demand and supply for a currency determine its price. b) Calculate the GBP/DKK cross rate using the following quotes. Show all calculations. ...
-
1. A friend has offered to play a gambling game with you that involves flipping a coin that be has provided. Since a flip of heads will be to his advantage, you want to test the coin for fairness...
-
The corporate charter of Gage Corporation allows the issuance of a maximum of 100,000 shares of common stock. During its first 2 years of operation, Gage sold 70,000 shares to shareholders and...
-
Which statement is true? a) All fi rms in oligopolistic industries are large. b) Most fi rms in the United States are oligopolies. c) The crucial factor in oligopolistic industries is product...
-
For the Newton-Raphson method to work, one should make sure that \(\mathbf{J}^{-1}\) exists. (a) True (b) False
-
The main difference between our being a debtor nation in the 19th century and our being a debtor nation since the early 1980s was that in the 19th century we ran up a debt by buying ________ goods;...
-
The basis for international finance is the exchange of ________.
-
In the United States today collusion is ________. a) illegal and does not exist b) illegal and does exist c) legal and does not exist d) legal and does exist
-
Required: a. What is the projected operating income? 199,000 b. What is the contribution margin per unit? c. What is the break even point in units? What is break even in dollars? d. If $80,000 of net...
-
What are conversion costs? What are prime costs?
-
Outdoor Amenities is a manufacturer of backyard and deck furniture. Its products are in high demand, and it carries no inventory. Following is a list of selected account balances from its trial...
-
The Green Giraffe Restaurant Group has 21 restaurants scattered across the midwestern portion of the United States. Green Giraffe is not publicly held, but is owned by a small group of investors. For...
-
Caesars Palace Las Vegas made headlines when it undertook a $75 million renovation. In mid-September 2015, the hotel closed its then-named Roman Tower, which was last updated in 2001, and started a...
-
Indonesia produces about 60 percent of the worlds palm oil. Palm oil is used in the production of shampoo, ice cream, and chocolate. Assume that Switzerland does not produce palm oil but companies in...
-
An article in the Wall Street Journal stated that Chinas treatment of American know-how has been a central issue to U.S.-China trade tensions over the past five years. a. What does the article mean...
-
James Halperin, co-chair of Heritage Auctions, was interviewed about his experiences auctioning rare coins. Noting that when the auction house first opened in the 1970s, I used to proofread every...
Study smarter with the SolutionInn App