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What is monthly repayment

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1. On a contract, you have a choice of receiving $25,000 six years from now or $50,000 twelve years from now. At what implied compound annual interest rate should you be indifferent between the two contracts?

2. Ann obtains a $150,000, 20-year mortgage with a bank at 9% p.a., compounded monthly.

a. What is her monthly repayment?

b. Suppose that after 5 years, Ann plans to repay the loan by making an additional payment each month along with her regular payment. How much must Ann pay each month if she wishes to pay off the loan in 10 years?

3. Mark wants to buy a new car for his wife and agrees with a 1.5-year, $12,000 loan. The financial institution quotes this loan at 10.5%, compounded monthly. Six months later, Mark is offered an optional loan from another financial institution. The new loan is quoted at 9.25% and Mark asks that the number of payments be set to 12. A 1% fee will be added to the remaining loan balance for the principal of the new loan. What was the first loan monthly payment and what is the amount Mark is going to pay for the new one? Is it a good idea to change?

4. Mary enters into a loan agreement to borrow $90,000 to help finance the purchase of her new home.

a. The agreement specifies the term of 20 years with monthly repayment at the fixed rate of 9% p.a. (compounded monthly). What is her monthly payment?

b. Five years has passed. A rival lender offers to refinance Mary's loan at the fixed rate of 8% p.a. (compounded monthly). The cost associated with this refinancing is $1,500. Should she refinance?

c. Suppose 9 years have passed since Mary enters the original loan. She's considering making an extra payment of $10,000 off her loan. If she plans to keep the term of the loan the same, how much will her monthly repayment reduce?

Reference no: EM132645566

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