FIN4320 Exam 2 Sample Assignment

FIN 4320 - Exam 2

1. A 15 year variable rate mortgage offers a first year teaser rate of 3.11%. After that the rate starts at 5% adjusted based on actual interest rates. If the mortgage is $325,000 compute the monthly payment during the first year. 

$2262

2. A 30 year variable rate mortgage offers a first year teaser rate of 3%. After that the rate starts at 5.5% adjusted based on actual interest rates. If the mortgage is $325,000 compute the monthly payment during the second year,if the interest rate increases to 5.5%. 

$1831

3. Peter buys a car worth $21,800 by putting a down payment of 10% and taking a loan for the balance amount. The loan carries an interest rate of 3.99% over a period of 5 years and needs to be paid on a monthly basis. What is the total interest Peter is expected to pay over the life of the loan?

Approximately $2,055

4. Peter buys a car worth $22,000 by putting a down payment of 30% and taking a loan for the balance amount. The loan carries an interest rate of 5.99% over a period of 3 years and needs to be paid on a monthly basis. What is the total interest Peter is expected to pay over the life of the loan?

Approximately $1,464

5. Peter buys a car worth $38,000 by putting a down payment of 15% and taking a loan for the balance amount. The loan carries an interest rate of 4.99% over a period of 5 years and needs to be paid on a monthly basis. What is the total interest Peter is expected to pay over the life of the loan?

Approximately $4,264

$170,325

PV = $175,000

I/Y = \8%

N = 15*12 = 180

FV = 0

PMT = ? = $1,672.39

2^nd AMORT to get balance after the 9^th month

P1 = 1, P2 = 9, arrow down to BAL = $170,325.20 = $170,325

7. Consider a 20 year fixed rate mortgage for $175,000 at nominal interest rate of 8%. If the borrower wants to pay off the remaining balance on the mortgage after making the 12th payment, what is the remaining balance on the loan? Assume monthly payments.

$171,301

PV = $175,000

I/Y = \8%

N = 20*12 = 240

FV = 0

PMT = ? = $1,463.77

2^nd AMORT to get balance after the 12^th month

P1 = 1, P2 = 12, arrow down to BAL = $171,301.08= $171,301

8. Consider a loan of $175,000 at nominal interest rate of 4.65% for 30 years. How much of the payment during the first year goes towards principal? Assume monthly payments.

$2,749

9. Consider a 30 year fixed rate mortgage for $175,000 at nominal interest rate of 8%. If the borrower wants to pay off the remaining balance on the mortgage after making the 9th payment, what is the remaining balance on the loan? Assume monthly payments.

$173,914

10. Consider a loan of $220,000 at nominal interest rate of 4.65% for 10 years. How much of the payment during the first year goes towards principal? Assume monthly payments.

$17,696

11. Calculate the Ownership Operating Advantage in year 5. 

$8861

12. Calculate the cost of Owning this car in year 1.

$6339

13. Which option is better? 

Leasing since IRR is 9.29%