# FIN4320 Exam 2 Sample Assignment

Pages: 4 Words: 890

## Question :

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

2nd AMORT to get balance after the 9th 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

2nd AMORT to get balance after the 12th 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%