Question

12/ José and Rosa are looking for a home. Their combined gross annual income is ​$

72,000. The best mortgage rate offered by their bank is 3.02 percent​ 5-year fixed rate compounded​ semi-annually with a​ 20-year amortization. The annual property taxes are estimated at ​$2280, and the annual heating costs are ​$1920. Their personal debt consumption is ​$600 a month. The​ bank's guideline for TDSR is 40 percent. Based on this​ information, what is the maximum monthly mortgage payment they could​ afford?

A.​$2000.00

B.​$1450.00

C.​$1580.59

D.​$1644.35

18/ How much money will you have in 25 years if you invest ​$150 at the beginning of each month at 8.4 percent interest rate being compounded​ semi-annually? (Round to the nearest​ dollar.)

A.​$149,774

B.​$148,750

C.​$144,828

D.​$146, 212

43/ If you want to save ​$25,000 for a down payment on a home in 7 ​years, assuming an interest rate of 4.2 percent compounded​ annually, how much money do you need to save each​ month? (Round to the nearest​ dollar.)

A.​$262

B.​$267

C.​$297

D.​$257

Answer 1

12). TDSR = (Annual mortgage payment + Property tax + other debt payments)/annual gross income

TDS = 40% of annual gross income = 40%*28,800

Annual mortgage payment = 28,800 - property tax - heating charges - other debt = 28,800 - 2,880-1,920-(600*12) = 17,400

Maximum monthly mortgage payment which they can afford = 17,400/12 = 1,450 (option B)

18). Annual rate is 8.4% so semi-annual rate is 8.4%/2 = 4.2%

If monthly payments are being made, then monthly rate r is [(1+4.2%)^(1/6)] -1 = 0.688%

PV = 0; PMT = 150; N = 25*12 = 300; rate = 0.688%; Mode (or type) = 1, solve for FV.

FV = 149,773.74 (option A)

43). FV = 25,000; N = 7*12 = 84; rate = 4.2%/12 = 0.35%, solve for PMT.

Savings each month = 256.53 (option D)