Your bank offers the following options on a $100,000 mortgage: i) A 15-year, 4% loan with no points ii) A 15-year, 3.5% loan, with 1.5 discount points If you plan to repay the loan in five years, what is the present value of the savings from having a lower outstanding balance at the end of the 5 years if you choose the option with points? (Use the 3.5% interest rate to discount the savings). [Hint: you first need to compute the outstanding balance at the end of year 5 for each option] $765.87 None of the above. $643.08 $1,000 please typing format
Your bank offers the following options on a $100,000 mortgage: i) A 15-year, 4% loan with no points ii) A 15-year, 3.5% loan, with 1.5 discount points If you plan to repay the loan in five years, what is the present value of the savings from having a lower outstanding balance at the end of the 5 years if you choose the option with points? (Use the 3.5% interest rate to discount the savings). [Hint: you first need to compute the outstanding balance at the end of year 5 for each option] $765.87 None of the above. $643.08 $1,000 please typing format
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
![Your bank offers the following
options on a $100,000 mortgage:
i) A 15-year, 4% loan with no
points
ii) A 15-year, 3.5% loan, with 1.5
discount points
If you plan to repay the loan in
five years, what is the present
value of the savings from having a
lower outstanding balance at the
end of the 5 years if you choose
the option with points? (Use the
3.5% interest rate to discount the
savings). [Hint: you first need to
compute the outstanding balance
at the end of year 5 for each
option]
$765.87
None of the above.
$643.08
$1,000
please typing format](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff6c3f08c-98b9-436b-8b85-ce1a42f8f1f1%2Fc14d5cf1-505e-409d-bf6f-fe422344a33c%2Fhsgojud_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Your bank offers the following
options on a $100,000 mortgage:
i) A 15-year, 4% loan with no
points
ii) A 15-year, 3.5% loan, with 1.5
discount points
If you plan to repay the loan in
five years, what is the present
value of the savings from having a
lower outstanding balance at the
end of the 5 years if you choose
the option with points? (Use the
3.5% interest rate to discount the
savings). [Hint: you first need to
compute the outstanding balance
at the end of year 5 for each
option]
$765.87
None of the above.
$643.08
$1,000
please typing format
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