monthly payment on mortgageloan

missl

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Nov 12, 2007
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33
Hi guys this problem is to complicated for me ...


Christina just purchased a small four-unit apartment building for $600,000. She financed it with a mortgage loan equal to 75% of the purchase price and paid the equity balance with cash she received from an inheritance. Interest on the mortgage loan was charged at 7.3% per annum compounded semi-annually and was to be repaid in equal monthly payments over a 25 year amortization period. The mortgage loan was for an initial term of 5 years at the end of which time it could be renewed at the interest rate prevailing at that time. The mortgage also included a prepayment provision that gave Christina the option to pay a lump sum equal to a maximum of 15% of the initial loan principal on each anniversary date, if she chose to.


What monthly payment will Christina have to make to service the mortgage loan?


to solve the problem do I need to care about the 75% of the purchase price. All I know in this problem is that i: 7.3/2 = 3.65% n: (25)(12) PV 600,000 how about when it says mortgage loan was for an initial term of 5 years at the end
 

Denis

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Feb 17, 2004
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missl said:
Christina just purchased a small four-unit apartment building for $600,000. She financed it with a mortgage loan equal to 75% of the purchase price and paid the equity balance with cash she received from an inheritance. Interest on the mortgage loan was charged at 7.3% per annum compounded semi-annually and was to be repaid in equal monthly payments over a 25 year amortization period. The mortgage loan was for an initial term of 5 years at the end of which time it could be renewed at the interest rate prevailing at that time. The mortgage also included a prepayment provision that gave Christina the option to pay a lump sum equal to a maximum of 15% of the initial loan principal on each anniversary date, if she chose to.
What monthly payment will Christina have to make to service the mortgage loan?
to solve the problem do I need to care about the 75% of the purchase price. All I know in this problem is that i: 7.3/2 = 3.65% n: (25)(12) PV 600,000 how about when it says mortgage loan was for an initial term of 5 years at the end
Your teacher sure likes to try and confuse you!
The problem can be simply worded:
450,000 is borrowed at a rate of 7.3% per annum compounded semi-annually.
If the payments are monthly and the term is 25 years, what is the payment amount?

See you other post: "Calculate the size of the loan payment or deposit."
Solve same way.
 

missl

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Nov 12, 2007
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33
thanks !!!


Also, I am taking look at this question why didn't they use 5000 bonds for the FV why 100,000 and where did they get the 20


Twenty $5,000 bonds, redeemable at par bearing 12% coupons payable quarterly, are sold eight years before maturity to yield 11.5% compounded quarterly.


Total FV of bonds is 20 x $5,000 = $100,000
------------------------

so which means for this question mar 1, 2006 a $10,000 bond, redeemable at par in 4 years with 11.5% coupons payable semi-annually, is sold to yield 13% compounded semi annually.

so the FV of bond is ? * 10000 ..
 

Denis

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Feb 17, 2004
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missl said:
Also, I am taking look at this question why didn't they use 5000 bonds for the FV why 100,000
and where did they get the 20

Twenty $5,000 bonds, redeemable at par bearing 12% coupons payable quarterly,
are sold eight years before maturity to yield 11.5% compounded quarterly.

Total FV of bonds is 20 x $5,000 = $100,000
so which means for this question mar 1, 2006 a $10,000 bond, redeemable at par in 4 years
with 11.5% coupons payable semi-annually, is sold to yield 13% compounded semi annually.

so the FV of bond is ? * 10000 ..
Twenty $5000 bonds = one $100,000 bond; same as twenty $5 bills = $100 !

What you've posted makes no sense: why are you talking "semi-annually" when the problem clearly states "quarterly"?
Where does 13% come from? Why 4 years?
 

missl

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Nov 12, 2007
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opps I meant to say that how about this other question here...



mar 1, 2006 a $10,000 bond, redeemable at par in 4 years
with 11.5% coupons payable semi-annually, is sold to yield 13% compounded semi annually.

so the FV is just 10,000 because it never mention twenty?
 

Denis

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Feb 17, 2004
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1,723
missl said:
so the FV is just 10,000 because it never mention twenty?
Lookit missL, do yourself a favor: FORGET about that "twenty":
it's got nothing to do with anything! 20 years means 240 months, that's it: over and out.
 
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