Math (Cost of Funds Advanced) Flashcards
A mortgage contract with a face value of $175,000 requires monthly payments of $1,103.21 over a 20-year amortization period. However, the mortgage broker advances only $171,000 after deducting a commission of $2,500, legal fees of $1,000, and an appraisal fee of $500. Calculate the cost of funds advanced for the borrower, expressed as an effective annual rate (j1).
(1) 4.730370%
(2) 4.777233%
(3) 3.972254%
(4) 4.834288%
4
j1 =
n=20(240)
171,000 -1,103.21 0
convert j12 to j1
= 4.834288
A mortgage loan with a face value of $150,000 is arranged through a mortgage broker. A commission of
$4,000, appraisal fees of $450, as well as survey and legal fees totalling $700 will be deducted from the face value before the funds are advanced to the borrower. Calculate the cost of funds advanced to the borrower, expressed as an effective annual interest rate (j1), if the loan is written at 6.75% per annum, compounded semi-annually, with monthly payments over a 20-year amortization period and a 5-year term?
(1) 7.803344%
(2) 7.537423%
(3) 9.581225%
(4) 8.540452%
1
KEY THING HERE, NOTICE THERE IS A 5 YEAR TERM!! THIS MEANS HAVE TO CALCULATE THE OSB60 second part
j2=6.75
n=20
150,000 ? 0
pmt=$1,132.26
j12=? (REMEMBER NEED TO CONVERT TO J1 AFTER)
n=60
144,850 -1,132.26 128,701.37 (OSB60!!!)
j12= 7.5 convered = 7.80
A mortgage contract with a face value of $170,000 requires monthly payments of $1,117.12 over a 20-year period. However, the mortgage broker advances only $166,000 after deducting a commission of $2,500, legal fees of $1,000, and an appraisal fee of $500. Calculate the cost of funds advanced for the borrower, expressed as an effective annual rate (j1).
(1) 6.078157%
(2) 5.234236%
(3) 5.291647%
(4) 5.361651%
4
j12=?
n=240
166,000 -1,117.12 0
convert j12 to j1 = 5.361651
A mortgage loan with a face value of $100,000 is arranged through a mortgage broker. A commission of
$3,500, appraisal fees of $450, as well as survey and legal fees totalling $600 will be deducted from the face value before the funds are advanced to the borrower. Calculate the cost of funds advanced to the borrower, expressed as an effective annual interest rate (j1), if the loan is written at 7.75% per annum, compounded semi-annually, with monthly payments over a 20-year amortization period and term?
(1) 8.952059%
(2) 8.571434%
(3) 8.252225%
(4) 9.439884%
2
j2 = 7.75 (convert to j12) n= 20 (240 months)
100,000 -813.42 0
j12 = ? (REMEMBER NEEDS TO BE CONVERTED TO J1 AFTER)
N=20 (240)
95,450.00 -813.42 0
=8.57 (after converting from j12 to j1)
A mortgage broker is arranging a partially amortized mortgage loan with a face value of $350,000. The loan contract is to be written at 6% per annum, compounded monthly. The repayment of the loan is to take place with monthly payments over an amortization period 15 years and a 5-year term. The borrower is to receive
$336,000 as a result of a broker’s commission of $10,000, a survey fee of $2,500, an appraisal fee of $500, and legal fees of $1,000, all of which are to be deducted from the face value. Calculate the cost of funds advanced to the borrower, expressed as an effective annual interest rate (j1).
(1) 7.296801%
(2) 9.942096%
(3) 8.407884%
(4) 7.163572%
1
NOTICE THERE IS A 5 YEAR TERM WHEN CACULATING THE COST OF FUNDS ADVANCED AS EFFECTIVE ANNUAL INTEREST RATE
j12=6%
n=15(180)
350,000 -2,953.49 0
j12=?
n=5(60 months)
336,000 -2,953.41 0sb60(266,031.76)
then convert j12 to j1 = 7.296
A mortgage broker initiates a mortgage in the amount of $100,000 at j2 = 5%, with an amortization period of 20 years, a term of 5 years, and monthly payments. The broker deducts a brokerage fee of $2,500 in addition to appraisal and legal fees totalling $750. Calculate the cost of funds advanced to the borrower, expressed as an effective annual rate (j1).
(1) 6.404727%
(2) 6.361028%
(3) 5.512096%
(4) 5.912962%
4
j2=5%
n=20(240)
100,000 ? 0
-657.13
j12=?
n=60
96750 -657.13 -83378.05
convert j12 to j1 = 5.91
Terrence needs to borrow $200,000 to buy a studio apartment, so he can move out of his East Vancouver basement suite. He saw an ad on the bus that said “Bad Credit, No Problem, We Loan to ANYONE!”, so he gave them a call. The potential lender was very friendly and said they could advance a loan of $200,000 with monthly payments of $1,400 over a 1-year term. The lender also gave Terrence a disclosure statement with a lot of fine print he didn’t understand which stated the face value of the loan is $224,000 and the outstanding balance at the end of 1-year loan term is $219,820.63. Calculate the cost of funds advanced (expressed as a j1) for this loan with a 1-year term.
(1) 15.832652%
(2) 19.019559%
(3) 12.521578%
(4) 17.115529%
2
so the confusing part, trying to figure out why we use 200,000 instead of 224,000 (the face value) i think thats the part that is tricky
j12=?
n=12
200,000 -1,400 -219,820.63
j12 converted to j1 = 19.01
