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You are about to purchase your first home for personal use. The price of the house is $400K. The property taxes and casualty insurance are estimated at $200 and $100 per month respectively; these two costs are placed each month into your escrow. You are estimating $3,500 in closing fees and expect to get a 15 year fixed rate mortgage for a fixed 4.9% APR with 2 points. Assume taxes and insurance remain constant for the duration of the loan. Your PMI payment is $200/month and will be needed as long as LTV is more than or equal to 80%. The appraised value of the house is expected to rise at 2% each year (at the end of each year). You are in a 30% marginal tax bracket. All tax credits in a given year will be received at the end of the year. You have two options:
1) You put down $40,000 on the home (plus any points and closing fees) and take out a 360K mortgage.
2)You put down $40,000 on the home (plus any points and closing fees), borrow another $40,000 from your uncle Vini and pay this back at 10% annual effective interest rate with 4 payments on 02/30/2015, 02/30/2016, 02/30/2017, 02/30/2018 (the interest portion of 40K
loan from uncle Vini is non-tax-deductible). You get a 320K mortgage. You take out the mortgage and buy the house on March 1 20014. The first payment ofXg? mortgage is due at the beginning of April 2014. You will sell the property on April 1st 2029 (15 years later) at its appraised value. Your MARR is 10% per year compounded monthly. What is the present cost of these transactions at March 1st 2014 under each option (attach your spreadsheet):
Option 1________________
Option 2________________
Should you borrow from your uncle?
Assume that the price index is one hundred and a typical basket of goods and services cost $8. Within the basket, you had four hamburgers and 3 hot dogs.
An electronic device is available that will reduce this year's labor cost by $10,000. The equipment is expected to last for 8 years. If labor costs increase at an average rate of 7% per year and the interest rate is 12% per year: a. What is the m..
What is CEO Toback's most pressing concern and how could he go about addressing this concern?2. Do you agree or disagree with the assessment of the concern and the plan to address this concern? Why or why not?
Consider the density Fx(x)= exp{-x} if x>_0, and 0 otherwise; Find: f(y) if Y = 2X+1, Find f(y) if Y = X^2, Find f(y) if Y = X, Find f(y) if Y = lnX
A company experiences rising returns to scale; that is, doubling all its inputs more than doubles its output. What can be inferred about the company's short-run costs?
Stephen Zehnder, an enterprising engineer, wants to get into business. He is looking at the following two alternatives. He has compiled the cost data for both alternatives as shown in table below. If Stephen wants to have at least a rate of return..
)TLC Lawn Care, Inc. provides fertilizer and weed control services to residential customers. Its seasonal services package, regularly priced at $250, includes several chemical spray treatments. As part of an effort to expand its customer base, TLC..
Over the last one year the Four Winds Novelty Corporation has recorded its internet sales and its monthly total variable costs for a particular novelty item as demonstrate in the following table.
Ann Isabel, a recent graduate from Tech, would like to be a millionaire when she will retire after 30 years. She would like to start with a deposit of $1,000 at the end of the first year and increase it every year by $400 thereafter. What interest..
Suppose that investment demand increases by $100. Assume that households have a marginal propensity to consume of 80 percent. Compute the first three rounds of multiplier effects as follows: a) What are the first cycle changes in spending? Total cu..
Plot the level and first difference of lnrgdpaus and briefly comment on the graphs and obtain the sample correlograms of the level and first difference of lnrgdpaus for 20 lags. What do they suggest to you?
Matt Christpher is a 25 year old mechanical engineering and his salary next year will be $60,000.Matt expects that his salary will increase at a steady rate of 5%per year until his retirement at age 65.
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