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Ann is looking for a fully amortizing 30 year Fixed Rate Mortgage with monthly payments for...

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Finance

Ann is looking for a fully amortizing 30 year Fixed RateMortgage with monthly payments for $3,200,000. Mortgage A has a4.38% interest rate and requires Ann to pay 1.5 points upfront.Mortgage B has a 6% interest rate and requires Ann to pay zero feesupfront.

(A) Assuming Ann makes payments for 30 years, what is Ann’sannualized IRR from mortgage A?

(B) Assuming Ann makes payments for 30 years, what is Ann’sannualized IRR from mortgage B?

(C) Assuming Ann makes payments for 2 years before she sells thehouse and pays the bank the balance, what is Ann’s annualized IRRfrom mortgage A?

(D) Assuming Ann makes payments for 2 years before she sells thehouse and pays the bank the balance, what is Ann’s annualized IRRfrom mortgage B?

Answer & Explanation Solved by verified expert
4.1 Ratings (642 Votes)
ANALYSIS OF MORTGAGE ARateMonthly interest rate438120365NperNumber of months 3012360PmtMonthly mortgage payment3200000PVAmount of loan640537778Using PV function of excel with Rate0365 Nper360Pmt3200000APV15Amount paid upfron 15    See Answer
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