What is the effective rate for option two per year

Assignment Help Business Economics

Reference no: EM13985840

To purchase a house for $80,000, a new couple has $12,000 available for down payment. They are considering two options:

Option 1: get a new standard mortgage with 10% APR interest compounded monthly for a 30-year term

Option 2: assume the seller’s old mortgage that has an interest rate of 8.5% APR compounded monthly, a remaining term of 25 years (from an original 30 years), a remaining balance of $35,394. You can obtain a second mortgage for the remaining balance from your credit union, at 12% APR compounded monthly, with a 25-year repayment period.

a) What is the effective rate for option 2 per year?

b) Compute the monthly payments for each option over the life of the mortgage

c) What APR charged by the credit union would make the two financing options equivalent?

Reference no: EM13985840

Questions Cloud

Decides to take the present value payment : Tracy won a $100 million jackpot. She can receive the jackpot as a $5 million payment each year for 20 years, or she can ask to receive the present value of all those payments all at once now. Assume an annual interest rate of 5 percent. If she decid..

Find the var for one year at a probability : Find the VAR for one year at a probability of 0.05. Identify and use the most appropriate method given the information you have - Using the information you obtained in part a, find the VAR for one day.

Rfid on players-social media and big data : Research this topic in the DeVry online Library, and please include the links to where you found the information that you are discussing. Some ideas to get you started include high-tech stadiums, RFID on players, social media, and big data.

Under conditions of perfect competition : Under conditions of perfect competition, profits can get squeezed out because of a

What is the effective rate for option two per year : To purchase a house for $80,000, a new couple has $12,000 available for down payment. get a new standard mortgage with 10% APR interest compounded monthly for a 30-year term. What is the effective rate for option 2 per year? Compute the monthly payme..

What is the distance from the star to the earth as measured : The astronaut ages 3.7 years during his journey. What is the distance from the star to the Earth as measured by an observer on the Earth?

Brand cannibalization and ?retail channel omnification : ?Zeta is an American multinational retail corporation. To move ahead of its competitors and increase revenue, Zeta began to employ a system to determine which products to stock and at what prices, and how to advertise to draw target customers. The pr..

Over what angle did space station rotate in the given period : Over what distance does another astronaut at the radius 215.0m on the outer ring move in the same time? Over what angle, in degrees, did the space station rotate in this period?

Consumption expenditures increased : Now consider the following information for the U.S.: During 2014, consumption expenditures increased by $20.5 billion, gross private domestic investment declined by $8.8 billion, and government expenditures increased by $14.4 billion. In addition, th..

User Account

All Pages