Solve using excel:
A. You have taken out a $225,000, 3/1 ARM. The initial rate of 5.8% (annual) is locked in for 3 years and is expected to increase to 6.5% at the end of the lock period. Calculate the initial payment on the loan. (Note: the term on this 3/1 ARM is 30 years)
B. Given the following information, calculate the Effective Borrowing Cost (EBC). Loan amount: $175,000, Term: 30 years, Interest rate: 7 %, Payment: $1,164.28, Discount points: 1, Origination fee: $3,250. Assume the loan is held until the end of year 10.
C. Suppose you have taken out a $200,000 fully-amortizing fixed rate mortgage loan that has a term of 15 years and an interest rate of 4.25%. In month 2 of the mortgage, how much of the monthly mortgage payment does the principal repayment portion consist of?
A)We taken out a $225,000, 3/1 ARM.
The initial rate of 5.8% (annual)
Locked in for 3 years and is expected to increase to 6.5% at the end of the lock period.
Given | Present value | 2,25,000 |
Face value | 0 | |
Interest rate | 5.80% | |
Interest rate per month | 0.0048333 | |
Term | 30 years | |
Total months(30*12) | 360 | |
PMT | ₹ -1,320.19 |
b)Calculation of Effective Borrowing Cost
Loan amount: $175,000, Term: 30 years, Interest rate: 7 %, Payment: $1,164.28,
Discount points: 1 means it is $1,750. Origination fee: $3,250.
Total upfront cost =($1,750+$3,250)=$5,000
Total Loan Amount=$175,000+$5,000 =$180,000
Interest rate =7%. So amount of interest= ($180,000*7%)=$12,600
Effective rate of interest = ($12,600/175,000*100)= 7.2%
C)
Given | Present value | 2,00,000 |
Face value | 0 | |
Interest rate | 4.25% | |
Interest rate per month | 0.00354167 | |
Term | 15 years | |
Total months(15*12) | 180 | |
PMT | ₹ -1,504.56 | |
Loan Balance after a month | ||
N(180-1) | 179 | |
Interest | 4.25% | |
PMT | ₹ -1,504.56 | |
Face value | 0 | |
Present value | 1,99,204 | |
PMT | ₹ -1,504.56 | |
Interest | 706 | |
Principal | 799 |
Please upvote if you find the solution to be helpful!
Get Answers For Free
Most questions answered within 1 hours.