Math (Penalty) Flashcards
A mortgage for $200,000 is written at 6% per annum, compounded semi-annually. The mortgage calls for monthly payments rounded up to the next higher dollar, a 5-year term, and a 20-year amortization. The mortgage contract permits the borrower to prepay the full amount of the loan at any time subject to the payment of a three months’ interest penalty. At the time of prepayment, the current comparable interest rate is 4% per annum, compounded semi-annually.
If the borrower wishes to prepay this loan at the end of the first year (with the 12th payment), calculate the amount of the three months’ interest penalty.
(1) $969.01
(2) $15,504.15
(3) $5,687.99
(4) $2,883.28
4
i think the thing on this one, is the comparable rate 4% might be to fool us.
j2 = 6%
n=20(240)
200 ? 0
=1424.37
j2=6% ( use instead of 4% gets alot closer)
n=60
200,000 -1424.37 169,592.08
osb 12 then add interest from months 13,14,15 gets really close!
what we are figuring out, from quizlet, you want to go 6%/12 to get the monthly percent. after you do..
j2=4%
n=60
200,0000 1424.27 169593.08
osb12=190673.33
x 6%/12 = .005 =
933 X 3 months
gets really close $2860.00
A mortgage for $300,000 is written at 6.5% per annum, compounded monthly. The mortgage calls for monthly payments rounded to the next higher dollar, a 5-year term, and a 25-year amortization. The mortgage contract permits the borrower to prepay the full amount of the loan at any time subject to the payment of an interest rate differential penalty. At the time of prepayment, the current comparable interest rate is 4.5% per annum, compounded monthly.
If the borrower wishes to prepay this loan at the end of the second year (with the 24th payment), calculate the amount of the interest rate differential penalty.
(1) $1,448.76
(2) $17,385.12
(3) $14,708.47
(4) $23,180.16
2
interest rate differential equation
mortgage balance X annual interest rate differntial (ie 6.5-4.5) X remaining terms in months
ok some progress here
so first…
j12 = 6.5
n=25(300)
? -2025.60 271,686.61
then..
ok, the outstanding balance = $289,761.70 (osb24)
X2%
=5795.23
divided by 12= 482.93
X 36 remaining payments
=17,385.70!!
A mortgage for $225,000 is written at 6.5% per annum, compounded semi-annually. The mortgage calls for monthly payments, a 5-year term, and a 20-year amortization. The mortgage contract permits the borrower to prepay the full amount of the loan at any time subject to the payment of a penalty, which is the greater of a three months’ interest penalty or the interest rate differential. Payments are rounded up to the next higher dollar. At the time of prepayment, the current comparable interest rate is 3.5% per annum, compounded semi-annually.
If the borrower wishes to prepay this loan at the end of the first year (with the 12th payment), calculate the amount of the payout penalty.
(1) $3,515.66
(2) $14,062.64
(3) $5,687.99
(4) $26,148.25
4
interest rate differential equation
mortgage balance X annual interest rate differntial (ie 6.5-4.5) X remaining terms in months
almost like j2 = 3% (6.5-3.5) then turn it to j1 then divided by 12 (months) = 566 or something
X outstanding balance osb 12 = 218,105.08
then X by amount of months left on the term 60-12 = 48
A mortgage for $350,000 is written at 6% per annum, compounded monthly. The mortgage calls for monthly payments, a 5-year term, and a 25-year amortization. The mortgage contract permits the borrower to prepay the full amount of the loan at any time subject to the payment of a penalty, which is the greater of a three months’ interest penalty or the interest rate differential. Payments are rounded up to the next higher dollar. At the time of prepayment, the current comparable interest rate is 4% per annum, compounded monthly.
If the borrower wishes to prepay this loan at the end of the first year (with the 12th payment), calculate the amount of the payout penalty.
(1) $5,624.87
(2) $5,156.37
(3) $27,500.66
(4) $34,621.75
3
interest rate differential equation
mortgage balance X annual interest rate differntial (ie 6.5-4.5) X remaining terms in months
ok, these are tough!!
j12=6%
n=25(300)
350,000 ? 0
NEED TO FIND OSB12!! this is the main thing
=343,769.93
then multiply by the difference in interest =2%
=6875.39
divide by 12 for monthly = 572.94
then multiply by remaining months
term is 5 years (60 months - 12 months paid)
=48 X 572.94
=27,501.59 (pretty much the right answer)
