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    Assignment 05 Gaddam

    Uploaded by

    Jagadish Jag's
    Plan C involves financing a $142,500 loan over 15 years at 9.5% interest. The monthly payment would be $1,488.02, but with taxes and insurance added it would be $1,788.02, which is more than the available $1,600 per month. Selling the house after 10 years for $91,673.72 would result in a negative cash flow of $13,632.95 over those 10 years. Plan B involves financing the same loan over 10 years at 9.5% interest. The total interest paid would be $51,257.28 over those 10 years. Under Plan A, the maximum down payment possible with $40,000

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    Assignment 05 Gaddam

    Uploaded by

    Jagadish Jag's
    109 views16 pages
    Plan C involves financing a $142,500 loan over 15 years at 9.5% interest. The monthly payment would be $1,488.02, but with taxes and insurance added it would be $1,788.02, which is more than the available $1,600 per month. Selling the house after 10 years for $91,673.72 would result in a negative cash flow of $13,632.95 over those 10 years. Plan B involves financing the same loan over 10 years at 9.5% interest. The total interest paid would be $51,257.28 over those 10 years. Under Plan A, the maximum down payment possible with $40,000

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    Plan C involves financing a $142,500 loan over 15 years at 9.5% interest. The monthly payment would be $1,488.02, but with taxes and insurance added it would be $1,788.02, which is more than the available $1,600 per month. Selling the house after 10 years for $91,673.72 would result in a negative cash flow of $13,632.95 over those 10 years. Plan B involves financing the same loan over 10 years at 9.5% interest. The total interest paid would be $51,257.28 over those 10 years. Under Plan A, the maximum down payment possible with $40,000

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    109 views16 pages

    Assignment 05 Gaddam

    Uploaded by

    Jagadish Jag's
    Plan C involves financing a $142,500 loan over 15 years at 9.5% interest. The monthly payment would be $1,488.02, but with taxes and insurance added it would be $1,788.02, which is more than the available $1,600 per month. Selling the house after 10 years for $91,673.72 would result in a negative cash flow of $13,632.95 over those 10 years. Plan B involves financing the same loan over 10 years at 9.5% interest. The total interest paid would be $51,257.28 over those 10 years. Under Plan A, the maximum down payment possible with $40,000

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    Question 1

    Evaluate plan C and select best financing method


    Total amount
    Down payment
    Remaining amount
    origin fee
    appraisal
    survey
    attorney fee
    processing
    escrow
    other

    150000
    5%
    142500
    1%

    Total
    The loan amount is 142,500. The monthly and interest payment is calculated below
    Amount
    Interest rate
    Term
    PMT

    142500
    9.50%
    15

    After Adding tax and insurance to PMT


    Tax and insurance
    PMT
    Total Pmt
    Available fund

    300
    1488.02
    1788.02
    1600
    188.02

    Amount
    Rate
    Term
    Payment
    Total

    142500
    9.50%
    10
    $70,851.86

    Future value of plan B

    $91,673.72

    7500
    1425
    300
    200
    200
    350
    150
    300
    10,425

    Column1

    Column2
    0.0079166667 Fund
    180 Upfront fees
    $1,488.02 Total

    Amount
    Rate
    Term
    Payment
    Total
    (deficit)
    Proceeds from house
    Monthly
    0.79%
    120
    1488.02 Proceeds from Sale
    Negative amount reqd for PMT

    IndM 5240 Engineering Economy


    Assignment 05
    Sai Ram Reddy Gaddam
    University of Central Missouri

    Column3
    40000
    10425
    29575

    29575
    0.25%
    120
    188.02 (Deficit)
    $13,632.95 (Negative)

    $170,000
    $70,851.86
    $99,148.14

    FW of Plan C

    $99,148.14
    $13,632.95
    $85,515.19

    Question 2
    What is the total amount of interest paid in plan A through the 10 year period?

    New Loan Amount


    Interest
    Term

    $142,500.00
    10%
    30

    For 10 year period


    Loan Amount
    Rate
    Term
    Payment

    $142,500.00
    10%
    10

    Loan amount
    PMT amount

    $385,753.41
    $256,166.73

    year period?

    Monthly
    0.83%
    360

    Monthly
    0.83%
    120
    $1,250.54

    loan amount
    Loan balance remaining
    Total

    Total amount paid


    Principal paid
    Total

    Interest Paid in 10 years

    Question 3
    What is the total amount of
    Years 1-3
    Amount
    Rate
    Term

    interest paid in plan B through year 4?

    $142,500
    9%
    30

    Payment

    Loan amount
    Rate
    Term

    $142,500.00
    9%
    3

    Loan amount
    Loan balance after 3 years
    Total
    Total amount paid in 3 years
    Principal paid in 3 yrs
    Total (3 year interest)
    Year 4
    Loan balance left
    Term (remaining years)
    Rate
    Payment
    Term 2 (1 year)

    Loan amount
    Loan balance after 4th year
    Total (4th yr principal paid)
    Total amount paid
    Principal paid
    Total (Interest in 4th yr)

    Interest for Years 1-3

    $139,296.79
    27
    9.50%
    1

    Interest for year 4


    Total Interest paid

    n B through year 4?
    $186,481.97
    $47,185.18
    $139,296.79

    Monthly
    0.75%
    360
    $1,146.59

    Loan amount
    PMT amount
    Total (Principal remaining)

    0.75%
    36

    $142,500.00
    $139,296.79
    $3,203.21
    $41,277.14
    $3,203.21
    $38,073.93

    $153,121.66
    $14,989.56
    $138,132.10

    Monthly
    324
    0.79%
    $1,195.67
    12

    $139,296.79
    $138,132.10
    $1,164.69
    $14,348.04
    $1,164.69
    $13,183.35

    $38,073.93

    Loan amount
    PMT amount
    Total (Principal remaining)

    $13,183.35
    $51,257.28

    Question 4
    What is the maximum amount of money availabale for down payment under plan A, if $40000

    Total amount of house


    Total amount available
    Apprasial
    Survey
    Attorneys Fees
    Procesing
    Escrow
    Other
    Total

    Tot available
    Loan expenses
    difference
    Loan amount
    New loan amount

    $150,000.00
    $112,626.26
    Origination fee (1% of new loan amount)

    After subracting the origin fee from the available amount deducting loan expenses we can find the total money availa
    Available
    origin fee
    Difference

    38500
    1126.26
    37373.74

    150,000
    40,000
    $300
    $200
    $200
    $350
    $150
    $300
    $1,500

    40000
    1500
    38500

    Down payment
    Other expenses

    Total
    nd the total money available for down payment

    $37,373.74
    $1,126.26
    $1,500.00
    $40,000.00

    Question 5
    By how much does the payment increase in plan A for each 1% increase in the interest rate?

    Amount
    No. of years
    Increasing rate
    10%
    11%
    12%
    13%
    14%
    15%
    16%
    17%
    18%
    19%
    20%

    Rate in months
    0.83%
    0.92%
    1.00%
    1.08%
    1.17%
    1.25%
    1.33%
    1.42%
    1.50%
    1.58%
    1.67%

    142500
    30
    No. of months
    360
    360
    360
    360
    360
    360
    360
    360
    360
    360
    360

    Pmt amount
    $1,250.54
    $1,357.06
    $1,465.77
    $1,576.33
    $1,688.44
    $1,801.83
    $1,916.28
    $2,031.59
    $2,147.60
    $2,264.17
    $2,381.20

    Question 6

    If you want to "buy down" the interest rate from 10% to 9% in plan

    Amount

    142500
    10%
    30

    PMT
    For 9%
    Amount

    142500
    9%
    30

    PMT

    Difference between 10% and 9% PMT amount =


    So extra amount for the down payment can be calculated by finding the present value of the difference amount
    PMT diff
    Rate
    term
    Extra Down Payment

    103.95
    10%
    30

    erest rate from 10% to 9% in plan A, how much extra down payment would you have to make?

    0.0083333333
    360
    $1,250.54

    0.0075
    360
    $1,146.59

    $103.95

    lue of the difference amount

    0.0083333333
    360
    $11,845.19

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