Reference no: EM132025048

Question: You have the opportunity to obtain a $250,000, 15-year mortgage loan at a 4.5% stated annual interest rate from Gotcha Bank. In order to close this mortgage loan, you must pay the following four fees to Gotcha Bank:

a $500 application fee

a $1,500 origination fee

1.5 points (1.5% of the mortgage loan value)

A $2,500 title insurance fee

Answer the following questions using excel:

i. What is the monthly payment on this 15-year mortgage loan with fees?

ii. What is the monthly payment on this 15-year mortgage loan without fees?

iii. What is the Effective Monthly Interest Rate for this 15-year mortgage loan with fees?

iv. What is the Effective Monthly Interest Rate for this 15-year mortgage loan if there were zero fees necessary (i.e. none of the four fees were required by the bank) to close the 15-year mortgage loan?

v. What is the Effective Annual Interest Rate (EAIR) for this 15-year mortgage loan with fees?

vi. What would the Effective Annual Interest Rate (EAIR) have been if there were zero fees necessary (i.e. none of the four fees were required by the bank) to close the 15-year mortgage loan?

vii. How much of your first payment is applied to your Principal Balance?

viii. How much of your first payment is applied to your Interest Expense?

ix. How much of your last payment is applied to your Principal Balance?

x. How much of your last payment is applied to your Interest Expense?

xi. If you make all 180 payments during the life of this loan, how much interest expense would you have incurred over the life of this loan?