2. Calculate the amount of 2 Calculate the amount of money that Emily needs to s
ID: 2737829 • Letter: 2
Question
2. Calculate the amount of 2 Calculate the amount of money that Emily needs to set aside from her bonus this year to cover the down payment on a new car, assuming she can eam 4% on her savings. What if she could earn 10% on her savings? 3. What will be the value of Emily's trust fund in 36 years, assuming she takes posses . What will be the value of Emily's trist fund in 36 years, assuming she takes possession of $20,000 in 2 years for her wedding, and leaves the remaining amount of money untouched where it is currently invested? 4 Suggest at least two conditions that Emily and Paul could take to accumulate more for their retirement. 5. Suppose that Emily and Paul purchase a s200,000 home in 5 years and make $40.000 down payment immediately. Find the monthly mortgage payment assuming that the remaining balance is financed at a 3% fised rate for 15 years, What if its mortgage term is 30 years?Explanation / Answer
2) (i) Interest Rate (Discount Rate) = 4%
Amount of Down Payment required in 3rd year = $ 10,000
Amount of money required this year to cover down Payment = $ 10,000
2.775
= $ 3,604/-
$ 3,604/- of money that Emily needs to set aside from her bonus this year to cover down payment on a new car.
(ii) Interest Rate (Discount Rate) = 10%
Amount of Down Payment required in 3rd year = $ 10,000
Amount of money required this year to cover down Payment = $ 10,000
2.4868
= $ 4,021/-
$ 4,021/- of money that Emily needs to set aside from her bonus this year to cover down payment on a new car.
3) Amount of trust fund at the end of 2nd year = $ 80,000 X 1.05 X 1.05 - $ 20,000
= $ 68,200/-
Value of trust fund at the end of 36th year = $ 68,200 X (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05) (1.05)
= $ 3,58,278/-
5) Mortgage:
A mortgage is a debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments. Mortgages are used by individuals and businesses to make large real estate purchases without paying the entire value of the purchase up front. Over a period of many years, the borrower repays the loan, plus interest, until he/she eventually owns the property free and clear. Mortgages are also known as "liens against property" or "claims on property." If the borrower stops paying the mortgage, the bank can foreclose.
A loan that is secured by property or real estate is called a mortgage. In exchange for funds received by the homebuyer to buy property or a home, a lender gets the promise of that buyer to pay back the funds within a certain time frame for a certain cost.
Mortgage Rate:
Mortgage rates are the rate of interest charged on a mortgage. They are determined by the lender in most cases, and can be either fixed, stay the same for the term of the mortgage, or variable, fluctuate with a benchmark interest rate. Mortgage rates rise and fall with interest rates and can drastically affect the homebuyers' market.
Facts Given in the Problem:
Home value = $ 2,00,000
Down payment made = $ 40,000
Loan Term = 15 years
Fixed Rate = 3%
Loan Amount = $ 1,60,000
If Mortgage Term is 15 years,
As per Mortgage Calculator,
Monthly Payment = $ 1,104.93
Total 180 Payments Amount = $ 1,98,887.51
Total Interest Payment = $ 38,887.51
Pay Off Date = May 2031
If Mortgage Term is 30 years,
As per Mortgage Calculator,
Monthly Payment = $ 674.57
Total 360 Payments Amount = $ 2,42,843.92
Total Interest Payment = $ 82,843.92
Pay Off Date = May 2046
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