With no preference other than financing

Assignment Help Financial Management

Reference no: EM131861412

You have a choice between the following two identical properties: Property A is priced at $150,000 with 80 percent financing at a 10.5 percent interest rate for 20 years. Property B is priced at $160,000 with an assumable mortgage of $100,000 at 9 percent interest with 20 years remaining. Monthly payments are $899.73. A second mortgage for $20,000 can be obtained at 13 percent interest for 20 years. All loans require monthly payments and are fully amortizing.

a. With no preference other than financing, which property would you choose?

b. How would your answer change if the seller of Property B provided a second mortgage for $20,000 at the same 9 percent rate as the assumable loan?

c. How would your answer change if the seller of Property B provided a second mortgage for $30,000 at the same 9 percent rate as the assumable loan so that no additional down payment would be required by the buyer if the loan were assumed?

Reference no: EM131861412

Questions Cloud

Should you refinance the second mortgage : Should you refinance the second mortgage if you intend to keep the house for the next seven years?

Neutral effect on the equity cash yield : What is the maximum price the investor could pay for the property before debt financing has a neutral effect on the equity cash yield?

After examining the various personal loan rates available : After examining the various personal loan rates available to? you, If you borrow ?$100 from a bank at an APR of 10 percent compounded weekly for 1 ?year,

Examining the three-sigma performance : Suppose that the standard deviation of the process distribution is 5.77. If the specifications for the access time are 500 +/_ 18 sec., is the process capable?

With no preference other than financing : With no preference other than financing, which property would you choose?

Required effective annual return : If her required effective annual return is 15%, what is the minimum dollar amount for which Mrs. M. should sell her shares?

You are making plans for your retirement : You are making plans for your retirement. You have just turned 30 and want to retire on your 65th birthday.

CAPM and required return-required returns for HRI and LRI : HR Industries (HRI) has a beta of 1.6, while LR Industries' (LRI) beta is 0.7. what will be the difference in the required returns for HRI and LRI?

In what ways can you evaluate your information sources : Why is it critical to support your business messages with reliable information? In what ways can you evaluate your information sources?

User Account

All Pages