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3 years ago

If your parents withdraw $125,000 from a money market deposit account so they can put a down payment on a house,

Business

1 answer:

Contact [7]3 years ago

4 0

Answer:

M2 decreases and M1 increases.

Explanation:

M1 and M2 are measures of money.

M1 is the narrowest definition of money. It includes currency, travellers check, demand deposit and other checkable deposits.

M2 includes M1 , small denomination time deposit, money market deposit and other assets that can easily be changed into cash easily and at a very little cost.

M3 includes M2, large domination time deposit and less liquid assets.

If $125,000 is withdrawn from the money market funds ,m2 reduces because money market fund is a component of m2.

M1 increases because $125,000 is converted to cash.

I hope my answer helps you.

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Without buying points, a monthly mortgage payment will be $958. Buying 1 point at closing would reduce the payment to $948. 75.

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The time taken to break even at buying 1 point will be in<u> 9 years</u>.

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Cost of each point =$1,000

Computation:

1. The computation of the reduced amount in the monthly mortgage payment:

$\begin{aligned}\text{Reduced Amount}&=\text{Original Payment}-\text{Reduced Payment}\\&=\$958-\$948.75\\&=\$9.25\end{aligned}$

2. The computation of yearly mortgage payment:

$\begin{aligned}\text{Yearly Mortgage Payment}&=\text{Reduced Amount}\times\text{Total Months in a Year}\\&=\$9.25\times12\\&=\$111\end{aligned}$

3. The computation of the number of years for the break-even by buying 1 point:

$\begin{aligned}\text{Number of Years}&=\dfrac{\text{Cost of Point}}{\text{Amount og Yearly Mortgage Payment}}\\&=\dfrac{\$1,000}{\$111}\\&=9.00\;\text{Years}\end{aligned}$

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