FIL 360 Pre-Test

TrefzgerSpring2018

1. A real estate appraiser is examining changes in home values in communities near ISU.

a. If a house in Normalis worth $200,000 today, and it increases in value by an average rate of 4% per year, what should it be worth in 5 years?

b. What price should someonehave paid 7 years ago for a house in Bloomington, if it has been growing in value by an average rate of 5% per year and is worth $200,000 today?

c. If a house in Heyworth that someone purchased for $200,000 6 years ago is worth $260,000 today, what has been the average annual rate of increase in its value?

d. If a house in El Paso that is purchased for $200,000 today grows in value by an average rate of 8% per year, how many years will pass before we would expect to see it sell for $600,000?

2. You pay $250,000 for a house, borrowing 80% of that amount through a fixed rate, fixed payment mortgage loan with a 6% stated annual interest rate and year-end payments for 30 years. What is the

amount of each annual payment?

3. You pay $250,000 for a house, borrowing 80% of that amount through a fixed rate, fixed payment mortgage loan with a 6% stated annual interest rate and end-of-month payments for 30 years. What is

the amount of each monthly payment?

4. Youwant to buy a house, and can afford a monthly loan payment of $1,000. If you can obtain a fixed rate, fixed payment mortgage loan with a 6% stated annual interest rate and end-of-month payments for 25 years, how much money can you afford to borrow?

5. Six years ago you bought a $250,000 house, borrowing 80% of that amount through a fixed rate, fixed payment mortgage loan with a 6% stated annual interest rate and end-of-month payments for 20 years. Today you want to repay the remaining principal balance on the loan. If you have made all payments as scheduled, how much do you still owe? Since 6/20 = 30% of the amortization period has passed, has 30% of the principal been repaid?

6. Youbought a houseon January 1, 2018for $250,000, borrowing 80% of that amount through a fixed rate, fixed payment mortgage loan with a 6% stated annual interest rate and year-end payments for 30 years. What portions of your single 2018 payment constituted interest and principal? What about in 2018?

7. You boughtahouse on January 1, 2017 for $250,000, borrowing 80% of that amount through a fixed rate, fixed payment mortgage loan with a 6% stated annual interest rate and end-of-month payments for 30 years. How much in total interest and principal did you pay on this loan during 2017?

8. You buy a house for $250,000, borrowing 80% of that amount through a fixed rate, fixed payment mortgage loan with a 6% stated annual interest rate and end-of-year payments for 30 years. If you make

all payments as scheduled, how much principal will be repaid during year 9 of the loan’s life?

9. You buy a house for $180,000, borrowing 75% of that amount through a fixed rate, fixed payment mortgage loan with a 5.4% stated annual interest rate and end-of-month payments for 25 years. If you

make all payments as scheduled, how much principal will be repaid during year 8 of the loan’s life?

10. You buy a house for $250,000, borrowing 80% of that amount through a variable rate mortgage loan with end-of-month payments for 30 years. The stated annual interest rate during year 1 is 4.8%. Then for year 2 the stated annual rate increases to 6%. What is each monthly payment during year 2? Will it equal the unchanging payment on a 30-year loan with the same original principal and a 6% annual interest rate?

11. You buyahouse for $250,000, borrowing 80% of that amount through a fixed rate, fixed payment mortgage loan with end-of-year payments for 30 years. Your annual payment is $15,117.52. What interest rate are you paying?

12. You buy a house for $250,000, borrowing 80% of that amount through a fixed rate, fixed payment mortgage loan with end-of-month payments for 30 years. Your monthly payment is $1,191.40. What interest rate are you paying? (Compute both APR and EAR.)

13. You buy a house for $250,000, borrowing 80% of that amount througha fixed rate, fixed payment mortgage loan with a 6% stated annual interest rate and end-of-month payments for 30 years. However,you immediately decidethat you will pay a larger payment than required each month: you will pay $1,622.88 monthly. How long will it take for you to repay all principal plus applicable interest?

14. You buy a house for $250,000, borrowing 80% of that amount through a fixed rate, fixed payment mortgage loan with a 6% stated annual interest rate and year-end payments for 30 years. After making the regular payments for 5 years, you inherit $50,000. You decide to use some of this money to repay part of the loan’s remaining principal balance. How much principal should you repay at the end of year 5 if you want to keep making the same yearly payments as before, but to have the loan repaid by the end of year 20 (over 15 remaining years)?

15. You buya house for $250,000, borrowing 80% of that amount through an installment loan with a 6% stated annual interest rate and end-of-year payments for 5 years. If you feel that your income is going to rise by 2% per year and therefore want each year’s payment to be 2% higher than the previous one, how much should the first year’s payment be?

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