(Practice Problems) FRM and ARM

(Note, this is how mortgage payments are calculated.) Payments on a loan are amortized when a fixed amount is paid at the end of each time period in order to pay off both the principle of the loan and the interest accumulated up to that point. At the end of each period, interest is charged on the amount still owing. Let P be the initial amount of the loan, and i > 0 be the interest rate charged (per period), R the size of the per period payment (paid at the end of each period), and Pt the amount that is still owed after t periods. So P0 = P(a) Find P1.(b) Find a first order linear recurrence for Pt.(c) Show that the solution to your recurrence relation isPt = (P-(R/i))(1+i)^t + (R/i)

Which one of the following statements about a fixed-rate mortgage (FRM) loan is correct? a. The monthly payment of the FRM loan changes over the life of the loan.   b. Each monthly payment contains the interest payment component and principal repayment component. The size of each component remains unchanged over the life of the FRM loan.   c. Each monthly payment contains the interest payment component and principal repayment component. As time goes by, the size of the interest component increases and the size of the principal component decreases, but the sum of the two components remain unchanged.   d. Each monthly payment contains the interest payment component and principal repayment component. As time goes by, the size of the interest component decreases and size of the principal component increases, but the sum of the two components remain unchanged.

Which of the following statement is true of amortization? The computation of loan amortization is wholly based on the computation of simple interest. Amortization solely refers to the total value to be paid by the borrower at the end of maturity. The amortization schedule represents only the interest portion of the loan. The amortization schedule provides principal, interest, and unpaid principal balance for each month.   In a typical loan amortization schedule: The amount of money paid towards reducing the loan balance decreases over time. The amount of interest paid each period does not remain constant. The amount of each payment does not remain constant. The amount of interest paid each period increases over time.

Which of the following is true of a fully amortized loan? A. The amount of the payment applied to the principal remains the same during the loan period. B. Equal amounts of the payment are appiled to the principal Interest, taxes, and insurance. C. Additional payments applied to the interest during the loan period reduce the number of monthly payments required. D. Additional payments applied to the principal during the loan period reduce the number of monthly payments required

The loans which are to be repaid within a short period (a year or less) are referred to as: O a. Fixed liabilities O b. Long-term liabilities O c. Contingent liabilities O d. Current Liabilities

What relationship exists between the length of the loan and the monthly payment? How does the mortgage rate affect the monthly payment?

Based upon the simple interest rate method of a fixed interest rate installment loan or mortgage, successive monthly loan payments over time   a. pay the same percentage to interest and principal.   b. pay increasing percentages to interest and decreasing percentages to principal.   c. pay increasing percentages to principal and decreasing percentages to interest.   d. pay decreasing percentages to interest and principal.

Select the correct choice that completes the sentence below. The rebate amount is equal to the rebate fraction O A. multiplied by the total finance charge O B. multiplied by the number of months of a loan OC. divided by the number of weeks of the loan O D. divided by the total interest

An important application of compound interest involves amortized loans. Some common types of amortized loans are automobile loans, home mortgage loans, and business loans. Each loan payment consists of interest and repayment of principal. This breakdown is often developed in an amortization schedule. Interest is largest in the first period and declines over the life of the loan, while the principal repayment is smallest in the first period and it increases thereafter. Quantitative Problem: You need $11,000 to purchase a used car. Your wealthy uncle is willing to lend you the money as an amortized loan. He would like you to make annual payments for 5 years, with the first payment to be made one year from today. He requires a 5% annual return. a. What will be your annual loan payments? Do not round intermediate calculations. Round your answer to the nearest cent. $ b. How much of your first payment will be applied to interest and to principal repayment? Do not round intermediate…

The principal P is borrowed and the​ loan's future value A at time t is given. Determine the​ loan's simple interest rate r. P​ = ​$2300​, A​ = ​$2722​, t​ = 6 months.

1. An installment loan is repaid a. in a single payment after a specified period of time. b. in equal payments over a specified period of time. 2. The amount of an installment loan depends on a. the amount financed, the number of payments, and the annual percentage rate. b. whether the borrower can afford to make a down payment. 3. With each monthly payment on an installment loan, the amount you owe to principal a. decreases. b. increases. 4. With each monthly payment on an installment loan, the percentage of your payment allocated to principal a. decreases. b. increases. 5. The final payment of an installment loan consists of a. the previous balance only. b. the previous balance plus current month's interest. 6. The finance charge on an 18-month, $5,000 installment loan is less thalon a a. 12-month, $5,000 installment loan. b. 24-month, $5,000 installment loan. Chap

Please include the excel formula If the following is a loan, identify a) the principal amount, b) the monthly interest rate, and c) the length of the loan in months. Determine if the following situation is an investment or a loan.   If the following is an investment, identify a) if it is a one-time or recurring investment, b) the number of compounding periods per year and c) the total number of compounding periods. If the following is a loan, identify a) the principal amount, b) the monthly interest rate, and c) the length of the loan in months.   Ashtyn purchased new appliances for her house for a total of $5,744. The store she buys the appliances from offers an annual simple interest rate of 8.5% with no down payment and monthly payments for 3 years.   This situation represents a(n) . a)  b)  c)  What will be your monthly payments?  Use Excel to calculate the value.

Over the life of a fixed payment amortized loan, such as a conventional mortgage, the proportion of the payment that goes to repay principal A : increases each month.  B : varies with economic conditions.  C : decreases each month.  D : stays constant over time.

Economics Consider a compounding loan plan where the amounts owed at EOYS 3 and 4 are $5,800 and $6.264, respectively. Approximately, what would be the amount of the loan?

Find the monthly payment needed to amortize principle and interest for the fixed rate mortgage. Use eithr the regular monthly payment formula or the given table.

With loans, spreadsheets make it easy to _____. (can be more than 1 of the options listed below) a. Calculate the amortization schedule b. Determine the number of remaining loan payments c. Find the loan balance due at any time d. Demonstrate the split between the principal and interest amounts.

Based on Exhibit 9-9, or using a financial calculator, what would be the monthly mortgage payments for each of the following situations? How do I round time value factor and final answers to 2 decimal places? What relationship exists between the length of the loan and the monthly payment? How does the mortgage rate affect the monthly payment?

Consider a home mortgage of ​$ at a fixed APR of ​% for years. a. Calculate the monthly payment. b. Determine the total amount paid over the term of the loan. c. Of the total amount​ paid, what percentage is paid toward the principal and what percentage is paid for interest.

Assume that there is no prepayment. Based on the following loan information on the fully-amortized fixed rate mortgages, What is the APR of Loan C? (choose the closest answer) Financial Calculator 1 ; Financial Calculator 2 ; Loan Amount Maturity Contract interest rate Upfront fees Upfront mortgage insurance fee APR 6.7% O 6.5% O 6.6% O 7.4% Loan C $200,000 30 years 6.25% 3% 1.6%

Use the amortization table to determine how much interest is paid in the first 4 months of the loan. Click the icon to view the amortization table. (Type an integer or a decimal.)

1. Find the amount (in $) of interest and the maturity value of the loans. Use the formula MV = P + I  to find the maturity value. (Round your answers to two decimal places.) Principal Rate (%) Time Interest Maturity Value $145,000 14 1 2 5 months $  $    2.Use MV = P(1 + RT)  to find the maturity value (in $) of the loan. (Round your answer to two decimal places.) Principal Rate (%) Time Maturity Value $5,600 7.4 14 months $

For the second mortgage application, calculate the percentage of appraised value and the potential credit (in $ ). \table[[\table[[Appraised],[Value]],\table[[Lender's],[Percentage]],\table[[Percentage of],[Appraised Value (in $)]],\table[[Balance of],[First Mortgage]],\table[[Potential],[Credit (in $)]]],[$356,900,75%,$,$196,500,$

The following loan was paid in full before its due date a) Find the value of h using an appropriate formula b) Use the actuarial method to find the amount of unearned interest c) Find the payoff amount Regular Monthly Payment # of Payments Remaining after Payoff APR 7.2% $247 8 What is the finance charge per $100 financed? h=$ (Round to the nearest cent)

Find the payment necessary to amortize a 5.5% loan of $7700 compounded semiannually, with 6 semiannual payments. Find (a) the payment necessary to amortize the loan and (b) the total payments and the total amount of interest paid based on the calculated semiannual payments. Then create an amortization table to find (C) the total payments and total amount of interest paid based upon the amortization table. a. The semiannual payment needed to amortize this loan is $ (Round to the nearest cent as needed.) b. The total amount of the payments is $ (Round to the nearest cent as needed.) The total amount of interest paid is $ (Round to the nearest cent as needed.) c. The total payment for this loan from the amortization table is $ %24 The total interest from the amortization table is $

(a)What is the rebate fraction of a 36 month loan paid off after the 12th payment?   (b) What is the rebate fraction of a 42 month loan paid off after the 18th payment?

Note: Round all answers to the nearest cent when necessary. Calculate the amount financed, the finance charge, and the total deferred payment price (in $) for the following installment loan.

A loan is to be amortized by n level annual payments of X where n > 5. You are given (1) The amount of interest in the first payment is 604.00 (2) The amount of interest in the third payment is 593.75 (3) The amount of interest in the fifth payment is 582.45 Calculate X.

(Fill-in-the-blank): A borrower is obtaining a loan, and based on the following wording in the Promissory Note, this mortgage loan: type of loan is a INTEREST: Interest will be charged on unpaid principal until the full amount of Principal has been paid. I will pay interest at a yearly rate of __________%. The interest rate I will pay will change in accordance with Section 4 of this Note. The interest rate required by this Section 2 and Section 4 of this Note is the rate I will pay both before and after any default described in Section 7(B) of this Note.

what is the total amount of monthly payments made at the end of the loan term

1. You have just obtained a commercial mortgage for $6.25M with a 5-year term, 25-year amortization period and 6.50% mortgage interest rate. (a) Construct an amortization table for the term of the loan assuming annual payments. What is the annual payment? What is the balance at maturity? (b) What is the e¤ective cost of borrowing if the borrower pays an origination fee of $30,000? (c) The borrower can repay the balance of the loan at any time prior to its maturity, but must pay a penalty of 5% of the outstanding balance. What is the cost of borrowing if the borrower pays an origination fee of $30,000 and pays off the remaining balance of the loan after making payments for 4 years?

With regard to mortgages, how is the monthly payment including principal and interest categorized as an annuity?

a. Find the required down payment.   b. Find the amount of the mortgage.   c. How much must be paid for the one point at​ closing? ​(Round to the nearest dollar as​ needed.)   d. Find the monthly payment​ (excluding escrowed taxes and​ insurance). ​(Round to the nearest dollar as​ needed.)   ​ e. Find the total cost of interest over 30 years. ​(Round to the nearest dollar as​ needed.)

_____ loans are lump-sum loans whereby the borrower repays the principal plus interest in a specified number of equal monthly payments. Revolving creditUnsecured     SecuredInstallment