# monthly payment on mortgageloan

#### missl

##### New member
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 ##### Senior Member 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

##### New member
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

##### Senior Member
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

##### New member

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

##### Senior Member
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.