A mortgage loan in the amount of $100,000 is made at 12% interest for 20 years.

Question

A mortgage loan in the amount of $100,000 is made at 12% interest for 20 years. Payments are to be monthly in each part of this problem.

a. What will monthly payments be if:
1. The loan is fully amortizing?
2. It is partially amortizing and a balloon payment of $50,000 is scheduled at the end of year 20?
3. It is a nonamortizing or interest only loan?
4. It is a negative amortizing loan and the loan balance will be $150,000 at the end of year 20?


b. What will the loan balance be at the end of year 5 under parts a (1) through a (4)?
c. What would be the interest portion of the payment scheduled for payment at the end of month 61 for each case (1) through (4) above?
d. Assume that the lender charges 3 points to close the loans in parts a (1) through a (4). What would be the APR for each?
e. If the loan is prepaid at the end of year 5, what will be the effective rate of interest for each loan in parts a (1) through a (4)?

Explanation / Answer

. This is a general description of the project and what should be expected of this proposal. One page. The body of the paper, This is where you use at least three functions of the course material to cost justify this investment (only 2 time value of money functions may be used, e.g. P/F, P/A, F/P, F/A, A/P, A/F). The investment can be any business proposal of your choice. In this section you should be more detailed about what the project is and what it will do for the business or organization. Graphs and pictures are always helpful. Three pages. A summary or conclusion is the final element. In this section that you justify the investment and convince the executive management or board of directors to make the investment. Use a format such as e.g. "Therefore based upon the information and analysis presented the organization should make this investment" If someone can help please .

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