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You are about to purchase your first home for personal use. The price of the house is $400K. The property taxes and casualty insurance are estimated at $200 and $100 per month respectively; these two costs are placed each month into your escrow. You are estimating $3,500 in closing fees and expect to get a 15 year fixed rate mortgage for a fixed 4.9% APR with 2 points. Assume taxes and insurance remain constant for the duration of the loan. Your PMI payment is $200/month and will be needed as long as LTV is more than or equal to 80%. The appraised value of the house is expected to rise at 2% each year (at the end of each year). You are in a 30% marginal tax bracket. All tax credits in a given year will be received at the end of the year. You have two options:
1) You put down $40,000 on the home (plus any points and closing fees) and take out a 360K mortgage.
2)You put down $40,000 on the home (plus any points and closing fees), borrow another $40,000 from your uncle Vini and pay this back at 10% annual effective interest rate with 4 payments on 02/30/2015, 02/30/2016, 02/30/2017, 02/30/2018 (the interest portion of 40K
loan from uncle Vini is non-tax-deductible). You get a 320K mortgage. You take out the mortgage and buy the house on March 1 20014. The first payment ofXg? mortgage is due at the beginning of April 2014. You will sell the property on April 1st 2029 (15 years later) at its appraised value. Your MARR is 10% per year compounded monthly. What is the present cost of these transactions at March 1st 2014 under each option (attach your spreadsheet):
Option 1________________
Option 2________________
Should you borrow from your uncle?
The second largest public utility in the nation is the sole provider of electricity in 32 counties of southern Florida. To meet the monthly demand for electricity in these counties, which is given by the inverse demand function P = 1,200 - 4Q, the..
During a recession, the hotdog project will earn $12,000.00 and the Champaign project will lose $8,000.00. If the alternative is earning $3,000.00 on government Treasury bill (T-bill), what should the manager do? Why?
When a recession is over, do people start to immediately feel affects of an efficient economy? Use the experience of most recent recession to justify your answer.
An insurance company wants to estimate the mean score on this exam for students who have enrolled in a special study program. They take a sample of 8 students in this program and determine that their scores are: 2, 5, 8, 8, 7, 6, 5, and 7. This sa..
Matt Christpher is a 25 year old mechanical engineering and his salary next year will be $60,000.Matt expects that his salary will increase at a steady rate of 5%per year until his retirement at age 65.
Determine national income (NI) for 2008 and what does national income tell us? Discuss the difference between GDP and NI?
Helen just bought a house for $250,000. Earthquake insurance, which would pay $250,000 in the event of a major earthquake, is available for $25,000. Helen estimates that the probability of a major earthquake in the coming year is 10 percent, and t..
The supply curve for product X is given by QXS = -520 + 20PX . a. Find the inverse supply curve. P = + Q b. How much surplus do producers receive when Qx = 400? When Qx = 1,200
if the cost basis for a macrs 5-year property is $100000 and the equipment is sold for $20000 after 5 years of beneficial use, what will be the depreciation charges the 1st and 5th years and the book value at the end of the 5th year
The income tax system in a country requires each citizen to pay 10% of income on earnings up to $40,000, and then pay 20% on any earnings over $40,000. If an individual has an income of $92350, then what is his average tax rate, in percentage term..
A student is taking two courses, history & math. The probability the student will pass in the history course is .60 and math is .70. The probability of passing both is .50.
Assume the demand function and the supply functions for 24-can beer case in Houston are: Demand: QD = 1,000 ? 50P Demand: QS = 40P + 100 (a) What are the market equilibrium price and quantity for beer case?
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