You have won the lottery and you decide to give your brother a $100,000 5 year mortgage

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You have won the lottery and you decide to give your brother a $100,000 5 year mortgage with a 25 year amortization period at 4.0% semi-annual (sa). If he went to the bank, he could get the same mortgage at 5.5% semi-annual.

a) Is the market value of this mortgage higher or lower than $100,000?

b) What is the value of the benefit you are giving to your brother (i.e. the difference between the book value of $100,000 and the market value)?

Related Book For answer-question

Financial Management Core Concepts

ISBN: 978-0132671033

2nd edition

Authors: Raymond M Brooks

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Posted Date: Feb 11, 2021 09:15 PM

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You have won the lottery and you decide to give your brother a $100,000 5 year mortgage

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ANSWER a The Market Value of the loan is lower since you ... View the full answer

Financial Management Core Concepts

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