Question 1 If your parents purchased an endowment policy of $10,000 for you and

Question

Question 1

If your parents purchased an endowment policy of $10,000 for you and the policy will mature in 12 years, how much is it worth today, discounted at 15 percent annually?

Year                     Project 1 Cash Flow                        Project 2 Cash Flow
   0                               -$10,000                                          -$10,000
   1                                    1,000                                                1,000
   2                                    2,000                                              11,000
   3                                  12,000                                                2,000

QUESTION 2

What is the total of POSITVE cash flows for years 1-3 for Project 1?

QUESTION 3

What is the mortgage loan balance of the loan above at the end of year 5?

1 points   

QUESTION 4

"A borrower takes a $300,000 loan with fixed rate of 4% amortized with monthly payments over 30 years. There are prepaid finance charges of 1 point on the loan amount plus $1,500. Calculate the APR. [Format Answer as a percentage - X.XX]"

1 points   

QUESTION 5

"A borrower is considering a 1-year adjustable rate mortgage of $250,000 that starts at 2.5%, 30 year amortization. The margin is 2.25%. The annual change caps are 2% per year. The current index is 1.25%. The life cap is 6% over the start rate. What is the inital monthly payment?"

1 points   

QUESTION 6

What is the fully indexed rate? [Format Answer as a percentage - X.XX]

1 points   

QUESTION 7

"At the end of year 1, what is the maximum allowed interest rate? [Format Answer as a percentage - X.XX]"

1 points   

QUESTION 8

If the INDEX moves up to 1.75%, what is the monthly payment for year 2? [WARNING: The loan balance is paid down a bit during the first year.]

If your parents purchased an endowment policy of $10,000 for you and the policy will mature in 12 years, how much is it worth today, discounted at 15 percent annually?

Explanation / Answer

Question 1 cannot be solved with given data.

Question 2:

Total of positive cash flows for project 1:

= $1,000+$2,000+$12,000

= $15,000

Total of positive cash flows for project 1:

= $1,000+$11,000+$2,000

= $14,000

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