Calculate the monthly payment, Finance Basics

On the 5th of March 2009, the Bank of England (BoE) lowered its main interest rate to 0.5%, the lowest on record since the Bank has published rates in 1970, which still remains unchanged. As a consequence of this low level of rates, HSBC's Lifetime Tracker Special mortgage rate stands at 3.99%. John McEnroe is about to buy a house in the countryside which costs £500,000 and is taking out a 25-year repayment mortgage for 75% of the acquisition value of the house. John has asked you to assess his ability to pay, in case the BoE increases its interest rate, as her maximum monthly payment can not exceed £2,200. You are required to:

1. Calculate the monthly payment John will need to meet under current conditions.

2. Assess the effect on John's monthly payments for each quarter percentage point increase in the BoE rate, up to 4% and identify at which rate John would no longer be able to make the monthly payment.

3. Determine the shortest length (to the nearest month) of mortgage John could take out if he wanted his monthly payment to be exactly the maximum he could afford (based on current mortgage assumptions).

 

Posted Date: 3/18/2013 4:13:48 AM | Location : United States







Related Discussions:- Calculate the monthly payment, Assignment Help, Ask Question on Calculate the monthly payment, Get Answer, Expert's Help, Calculate the monthly payment Discussions

Write discussion on Calculate the monthly payment
Your posts are moderated
Related Questions
The scope of supply chain management  Supply chain management includes the determination of suppliers; distributors, distribution channels and warehousing; manufacturing infor

Factors contribute to increasing the profitability of a business Several other factors contribute to increasing the profitability of a business. For companies that are highly d

Example of Miller-Orr Model XYZ's management has put the minimum cash balance to be equivalent to Sh.10, 000. The standard deviation of daily cash flow is of Sh.2, 500 and the

Example of NPV Method Resolution limited intends to purchase a machine worth Shs.1, 500,000 that will have a residue value Shs.200,000 after 5 years helpful life. The saving

how can I get?

Similarities between Preference Share Capital and Debt Similarities between Preference Share Capital and Debt are as follows: a) Both have fixed returns. b) Both do not

Importance of Interest Rates These are of a specifically relevance to a finance manager since: i) They measure the cost of borrowing. ii) Interest rates in a country influen

Task The following information has been extracted from the accounts of R Ltd., a manufacturer and distributor of home cordless phone in Hong Kong.

Ask questioAustralian’s Speleological App Projectn #Minimum 100 words accepted#

DIY Inc. plans to raise $200,000 with a right offering. The current stock price is $100 and there are 80,000 shares outstanding.  a. If DIY sets the subscription price to be $80