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(Solved): QUESTION 13 Smith Is Looking For A Fully Amortizing 30 Year Fixed Rate Mortgage With Monthly Payment ...

QUESTION 13

  1. Smith is looking for a fully amortizing 30 year Fixed Rate Mortgage with monthly payments for $450,000.

    Mortgage A has a 4.25% interest rate and requires Smith to pay 1.5 points upfront.

    Mortgage B has a 5% interest rate and requires Smith to pay zero fees upfront.

    Assuming Smith makes payments for 2 years before she sells the house and pays the bank the balance, what is Smith’s Annualized IRR from mortgage A?

  2. Smith is looking for a fully amortizing 30 year Fixed Rate Mortgage with monthly payments for $450,000.

    Mortgage A has a 4.25% interest rate and requires Smith to pay 1.5 points upfront.

    Mortgage B has a 5% interest rate and requires Smith to pay zero fees upfront.

    Assuming Smith makes payments for 2 years before she sells the house and pays the bank the balance, what is Smith’s Annualized IRR from mortgage B?

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