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miss Akunina [59]
2 years ago
8

Jane Doe earns $58,800 per year and has applied for a(n) $99,000, 30-year mortgage at 9 percent interest, paid monthly. Property

taxes on the house are expected to be $6,900 per year. If her bank requires a gross debt service ratio of no more than 30 percent, will Jane be able to obtain the mortgage
Business
1 answer:
Mashcka [7]2 years ago
5 0

Answer:

GDS ratio is 28.12% and is less than the maximum of 30%,hence Jane would be able to get the mortgage

Explanation:

The gross debt service ratio is a measure of the ease with which mortgage holders can repay their housing loan.It compares the yearly property obligations with the yearly income of the mortgage holder.

Gross Debt Service ratio=yearly obligations/yearly income

yearly obligations=property taxes+yearly mortgage repayment

property taxes is $6,900

mortgage repayment=pmt(rate,nper,-pv,fv)

rate is 9%

nper is the duration mortgage of 30 years

pv is the present value of mortgage

fv is future value of mortgage,it is not known,hence taken as zero

=pmt(9%,30,-99000,0)=$9,636.30  

yearly obligations=$6,900+$9,636.30=$ 16,536.30  

GDS = 16,536.30/58,800=28.12%

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Solution :

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2. The rate of interest annually = 12%

Present value $=\$5000 \times \text{PVAD of} \ \$1(12\%, 5)$

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3. The rate of interest annually = 12%

The rate of interest quarterly = 3%

Present value = $\$5000 \times \text{PV of} \ \$1(3\%, 4) + \$5000 \times \text{PV of} \ \$1(3\%, 8) +\$5000 \times \text{PV of} \ \$1(3\%, 12) $ $+\$5000 \times \text{PV of} \ \$1(3\%, 16) + \$5000 \times \text{PV of} \ \$1(3\%, 16)$

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Answer:

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