The time value of money, Larry Davis borrows $80,000 at 14

The time value of money

Reference no: EM1350243

Larry Davis borrows $80,000 at 14% interest toward the purchase of a home. His mortgage is for 25 years.

a. How much will his annual payments be? (Although home payments are usually on a monthly basis, the analysis here needs to be on an annual basis for ease of computation. Compute a reasonably accurate answer.)

b. How much interest will he pay over the life of the loan?

c. How much should he be willing to pay to get out of a 14% mortagage and into a 10% mortgage with 25 years remaining on the mortgage?

Assume current interest rates are 10%.
Carefully consider the time value of money.
Disregard any taxes.

Reference no: EM1350243

Questions Cloud

Consequences of inventory costs on working capital : Discuss how extending credit affects working capital requirements and the cash conversion period (cycle)? Evaluate the consequences of inventory costs on Working Capital needs and the Cash Conversion Period.

Conflict-resolution methodologies : Find potential conflict areas and develop conflict-resolution methodologies to deal with these conflicts.

Which of the following statements would most likely be true : the fact that it moves very slowly by sky would probably cause it to be named after Yurtle, the god of turtles.

Acknowledge technoogy-s polypotency : Richard Sclove argues that we must do more to acknowledge technoogy's 'polypotency.' What does this term mean, why does Sclove think that it is significant to acknowledge this characteristic of technology?

The time value of money : Larry Davis borrows $80,000 at 14 percent interest toward the purchase of a home. His mortgage is for twenty-five years.

Types of aggression that are prevalent in schools : Can someone help me describe the types of aggression that are prevalent in schools,and which theories (Drive Theories, or Social Learning Perspective, or General Agression Model) best describe the theories

Illustrate what happens to inflation is indeterminate : Illustrate what happens to inflation is indeterminate; it could be either higher or lower than in the standard model.

Explain when it comes to blending shareholder value : Explain when it comes to blending shareholder value with social responsibility and it doesn't have to be a case of oil and water

Determine the price of a cup : A coffee shop has a cost of $0.80 per cup of gourmet coffee. They use a mark-up of 200 percent. Determine the price will they charge for a cup of gourmet coffee?

User Account

All Pages