What is the monthly mortgage payment on mikes mortgage

Assignment Help Financial Management

Reference no: EM131962873

Joi Chatman recently received her finance degree and has decided to enter the mortgage broker business. Rather than working for someone else, she will open her own shop. Her cousin Mike has approached her about a mortgage for a house he is building.

The house will be completed in three months, and he will need the mortgage at that time.

Mike wants a 25-year, fixed-rate mortgage in the amount of $500,000 with monthly payments. Joi has agreed to lend Mike the money in three months at the current market rate of 8 percent.

Because Joi is just starting out, she does not have $500,000 available for the loan; so she approaches Ian Turnbell, the president of IT Insurance Corporation, about purchasing the mortgage from her in three months.

Ian has agreed to purchase the mortgage in three months, but he is unwilling to set a price on the mortgage. Instead, he has agreed in writing to purchase the mortgage at the market rate in three months. There are Treasury bond futures contracts available for delivery in three months. A Treasury bond contract is for $100,000 in face value of Treasury bonds.

1. What is the monthly mortgage payment on Mike's mortgage?

2. Suppose that in the next three months the market rate of interest rises to 9 percent. How much will Ian be willing to pay for the mortgage?

3. Suppose that in the next three months the market rate of interest falls to 7 percent. How much will Ian be willing to pay for the mortgage?

Reference no: EM131962873

Questions Cloud

Find the value of levered equity today : The company will be liquidated after one year (on date 1) with expected financial on date 1 as shown below.

How much would you have to deposit in savings account : How much would you have to deposit in your savings account today in order to be able to withdraw $1301 each year for two years, starting six years from now?

Consider how you feel about labor unions : 1) Consider how you feel about labor unions. Why might somebody think differently?

Experienced a case of workplace violence : Have you ever experienced a case of workplace violence? What role, if any, might the organization itself play in instigating workplace violence?

What is the monthly mortgage payment on mikes mortgage : Suppose that in the next three months the market rate of interest falls to 7 percent. How much will Ian be willing to pay for the mortgage?

Perspective of what leadership is : Everyone has their own perspective of what leadership is, who leaders are, and what leaders do.

How much would the johnsons need for a down payment : The Johnsons want to buy a 2017 Nissan Altima for $28,570. Bank of America will charge them a 5.75 percent annual rate compounded monthly for a 5-year loan.

Decides to avoid using job descriptions : Briefly describe some situations that would be most favorable for a company that decides to avoid using job descriptions

What is the definition of keystone species : What is the definition of keystone species? Name and describe your chosen species. Where does it live? Why is it considered a keystone species?

User Account

All Pages