1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Ann [662]
2 years ago
5

A borrower takes out a 30-year adjustable rate mortgage loan for $200,000 with monthly payments. The first two years of the loan

have a "teaser" rate of 4%, after that, the rate can reset with a 5% annual payment cap. On the reset date, the composite rate is 6%. What would the Year 3 monthly payment be?
a. $955
b. $1,067
c. $1,003
d. $1,186
e. Because of the payment cap, the payment would not change.
Business
1 answer:
lara31 [8.8K]2 years ago
6 0

Answer:

1003

Explanation:

Given:

Period= 30 years, Loan amount= $200,000,

Payments- Monthly,

Teaser rate for first 2 years = 4%,

Annual payment cap=5%, Composite rate on reset date= 6%

Annual rate for 2 years =4%

Monthly rate will be 4/12 = 0.3333% = 0.003333

n=30years=360 months

Monthly payment for first 2 years = Pr(1+r)^n/((1+r)^n-1)

= 200000\times0.0033\times1.033^{360}/(1.033^{360}-1)

= 954.83

or by Excel function = PMT(0.003333,360,200000,0) = 954.83

Loan balance after 2 years = PV(0.003333,336,-954.83,0) = 192,812.36 or

Balance=A(1+r)^n-PMT\times(1+r)^n-1)/i

=200000(1.0033)^{24}-954.83(1+0.003333)^{24}-1)/0.003333

= 192,812.36

Composite rate is 6% but payment is capped at 5%. So new payment from year 3 is 954.83×1.05=1002.57=1003

You might be interested in
You are contemplating adding direct selling activities to your existing bricks-and-mortar retail business to increase sales. You
Ksivusya [100]

Answer:

It may be more expensive and time-consuming than using an intermediary

Explanation:

Direct selling makes it hard to reach new customers and also entails spending an extensive time in trying to convince prospective customers before sales is made. Sadly, in some situations, some prospects do not buy in on the intended product and thus, no sale is made and time wasted.

8 0
3 years ago
Read 2 more answers
On March 3, Cobra Inc. purchased a desk for $330 on account. On March 22, Cobra purchased another desk for $460 also on account,
Olin [163]

Answer:

Cobra Inc.

The amount that Cobra should report for desks is $790.

Explanation:

a) Data and Calculations:

Purchases on March 3 =    $330

Purchases on March 22 = $460

Payment on March 24 =   ($460)

Amount unpaid =               $330

b) The amount that Cobra Inc. should report as Accounts Payable at the end of March is $330.  However, in reporting for the desks, it should report $790 in assets.  This amount represents the value of desks that the company is possessing, which is financed by company cash and creditors.

4 0
2 years ago
You have an investment that will pay you 1.18 percent per month. a. How much will you have per dollar invested in one year? (Do
fiasKO [112]

Answer:

The correct answer for option (a) is $1.15 and for option (b) is $1.33.

Explanation:

According to the scenario, the given data are as follows:

Present value (PV) = $1

Rate of interest (R) = 1.18% per month

Time period (for option a) (t1)= 12 months

Time period ( for option b) (t2)= 24 months

So, we can calculate the future value by using following formula:

FV = PV × ( 1 + R )^t

(a). By putting value in the formula:

FV = $1 ( 1 + 0.0118)^12

= $1 × 1.1511610877

= $1.15

FV = PV × ( 1 + R )^t

(b). By putting value in the formula:

FV = $1 ( 1 + 0.0118)^24

= $1 × 1.32517184983

= $1.33

6 0
3 years ago
Joan Johnson is a paralegal for a large law firm that handles corporate and securities work. The lawyer for whom Joan works alwa
Mariulka [41]

Answer:

1. Based on her years of experience, Joan Johnson can answer the question by detailing the advantages and disadvantages of incorporating in each state for the client.

2. If Joan does not feel confident enough to address the question, then she can refer the matter to her supervisor.

3. If Joan answers, the client will derive immediate satisfaction and will be confident to continue the relationship with the firm.  This is because his awareness that the firm can address his questions is re-enforced.

4. If Joan does not answer the client immediately, the client may feel that the firm's personnel are not well-trained and are unable to handle not-too difficult technical issues.

Explanation:

A firm's clients usually require immediate clarifications whenever they ask their questions.  Therefore, an effective and efficient firm should ensure that its paralegal officers are well-trained and well-informed to handle initial client enquiries while the details are referred to their supervisors.

8 0
3 years ago
When a labor union and an employer cannot agree on the terms of a contract what often happens?
vesna_86 [32]
A would be a good answer. 
5 0
3 years ago
Other questions:
  • Countess Corp. is expected to pay an annual dividend of $4.57 on its common stock in one year. The current stock price is $73.59
    8·2 answers
  • In the demand-withdraw interaction pattern, the person who asks for the change is the
    15·1 answer
  • "Mrs. Smith operates a business in a competitive market. The current market price is $8.10. At her profit-maximizing level of pr
    10·2 answers
  • If 25 consecutive tosses of a fair coin have all been heads, some individuals tend to think that the next one "must be heads." T
    14·1 answer
  • A music streaming service provides its customers with recommendations based on their past listening behavior. This is an example
    13·1 answer
  • The primary purpose of the legal reserve requirement is toa. Prevent banks from hoarding too much vault cash.b. Provide a means
    13·1 answer
  • Ian Burns is the new payroll accountant for ECG Marketing. Certain employees have been requesting changes in classification from
    12·1 answer
  • SKRAM Corporation is appealing directly to the shareholders of IDNIC Corporation to acquire shares of IDNIC stock. This appeal i
    10·1 answer
  • If the minimum attractive rate of return is 7%, which alternative should be chosen assuming identical replacement (like kind exc
    14·1 answer
  • At the beginning of January of the current year, Thomas Law Center's ledger reflected a normal balance of $55,000 for accounts r
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!