Question

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37. In a fixed-term, level-payment reverse mortgage, sometimes called a reverse annuity mortgage, or RAM, a lender agrees to pay the homeowner a monthly payment, or annuity, and expects to be repaid from the homeowner’s equity when he or she sells the home or obtains other financing to pay off the RAM. Consider a household that owns a $150,000 home free

and clear of mortgage debt. The RAM lender agrees to a $100,000 RAM for 10 years at 6 percent. Assume payments are made annually, at the beginning of each year to the homeowner. Calculate the annual payment on the RAM.

A. $7,157.35

B. $7,586.80

C. $12,817.73

D. $13,586.80

Answer 1

Option A is correct, that is 7157.35

rate or interest rate = 6%

Nper or period = 10

Present value or PV = 0

Future value = -100000

Type = 1

by inserting the above values in the financial calculator PMT function, the above answer is calculated