Annual Percentage Rate and Real Estate

Topics: Annual percentage rate, Mortgage loan, Interest Pages: 3 (892 words) Published: June 24, 2013
Question 10
(15 points) You have just started your first job and you want to have the basic appliances (fridge, washer, dryer, etc.) in your apartment. You face the following choices: (i) Purchase all appliances at the store using a bank loan. There is no down payment as the bank can take your appliances if you default on the loan. The loan is at the annual market rate of 5%, and the loan amount is $6,000 to be repaid monthly over 4 years.(ii) Rent-to-buy from the same store. The monthly rental is $125 for 48 months and then you pay $1,000 to own all the appliances. What is the net cost today of the cheapest option? (Enter just the number without the $ sign or a comma; round off decimals. Since this asks for a cost, you just enter the number without a negative sign.) Question 9

(15 points) Two years ago, you purchased a $20,000 car, putting $4,000 down and borrowing the rest. Your loan was a 48-month fixed rate loan at a stated rate of 6% per year.You paid a non-refundable application fee of $100 at that time in cash. Interest rates have fallen during the last two years and a new bank now offers to refinance your car by lending you the balance due at a stated rate of 4% per year. You will use the proceeds of this loan to pay off the old loan. Suppose the new loan requires a $200 non-refundable application fee. Given all this information, should you refinance? How much do you gain/lose if you do? (no, lose15)

(yes, gain15)
(no, lose 29)
(no, lose 25)
(yes, gain 17)
(yes,gain 19)
Question 8
(15 points) Jingfei bought a house 10 years ago for $200,000. Her down payment on the house was the minimum required 10% at that time she financed the remainder with a 15-year fixed rate mortgage. The annual interest rate was 10% and she was required to make monthly payments, and she has just made her 120th payment. A new bank has offered to refinance the remaining balance on Jingfei's loan and she will have to pay $1,900 per month for the next 5 years, but the total...
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