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Question 1

Evaluate plan C and select best financing method


Total amount
Down payment
Remaining amount
origin fee
appraisal
survey
attorney fee
processing
escrow
other

150000
5%
142500
1%

Total
The loan amount is 142,500. The monthly and interest payment is calculated below
Amount
Interest rate
Term
PMT

142500
9.50%
15

After Adding tax and insurance to PMT


Tax and insurance
PMT
Total Pmt
Available fund

300
1488.02
1788.02
1600
188.02

Amount
Rate
Term
Payment
Total

142500
9.50%
10
$70,851.86

Future value of plan B

$91,673.72

7500
1425
300
200
200
350
150
300
10,425

Column1

Column2
0.0079166667 Fund
180 Upfront fees
$1,488.02 Total

Amount
Rate
Term
Payment
Total
(deficit)
Proceeds from house
Monthly
0.79%
120
1488.02 Proceeds from Sale
Negative amount reqd for PMT

IndM 5240 Engineering Economy


Assignment 05
Sai Ram Reddy Gaddam
University of Central Missouri

Column3
40000
10425
29575

29575
0.25%
120
188.02 (Deficit)
$13,632.95 (Negative)

$170,000
$70,851.86
$99,148.14

FW of Plan C

$99,148.14
$13,632.95
$85,515.19

Question 2
What is the total amount of interest paid in plan A through the 10 year period?

New Loan Amount


Interest
Term

$142,500.00
10%
30

For 10 year period


Loan Amount
Rate
Term
Payment

$142,500.00
10%
10

Loan amount
PMT amount

$385,753.41
$256,166.73

year period?

Monthly
0.83%
360

Monthly
0.83%
120
$1,250.54

loan amount
Loan balance remaining
Total

Total amount paid


Principal paid
Total

Interest Paid in 10 years

Question 3
What is the total amount of
Years 1-3
Amount
Rate
Term

interest paid in plan B through year 4?

$142,500
9%
30

Payment

Loan amount
Rate
Term

$142,500.00
9%
3

Loan amount
Loan balance after 3 years
Total
Total amount paid in 3 years
Principal paid in 3 yrs
Total (3 year interest)
Year 4
Loan balance left
Term (remaining years)
Rate
Payment
Term 2 (1 year)

Loan amount
Loan balance after 4th year
Total (4th yr principal paid)
Total amount paid
Principal paid
Total (Interest in 4th yr)

Interest for Years 1-3

$139,296.79
27
9.50%
1

Interest for year 4


Total Interest paid

n B through year 4?
$186,481.97
$47,185.18
$139,296.79

Monthly
0.75%
360
$1,146.59

Loan amount
PMT amount
Total (Principal remaining)

0.75%
36

$142,500.00
$139,296.79
$3,203.21
$41,277.14
$3,203.21
$38,073.93

$153,121.66
$14,989.56
$138,132.10

Monthly
324
0.79%
$1,195.67
12

$139,296.79
$138,132.10
$1,164.69
$14,348.04
$1,164.69
$13,183.35

$38,073.93

Loan amount
PMT amount
Total (Principal remaining)

$13,183.35
$51,257.28

Question 4
What is the maximum amount of money availabale for down payment under plan A, if $40000

Total amount of house


Total amount available
Apprasial
Survey
Attorneys Fees
Procesing
Escrow
Other
Total

Tot available
Loan expenses
difference
Loan amount
New loan amount

$150,000.00
$112,626.26
Origination fee (1% of new loan amount)

After subracting the origin fee from the available amount deducting loan expenses we can find the total money availa
Available
origin fee
Difference

38500
1126.26
37373.74

150,000
40,000
$300
$200
$200
$350
$150
$300
$1,500

40000
1500
38500

Down payment
Other expenses

Total
nd the total money available for down payment

$37,373.74
$1,126.26
$1,500.00
$40,000.00

Question 5
By how much does the payment increase in plan A for each 1% increase in the interest rate?

Amount
No. of years
Increasing rate
10%
11%
12%
13%
14%
15%
16%
17%
18%
19%
20%

Rate in months
0.83%
0.92%
1.00%
1.08%
1.17%
1.25%
1.33%
1.42%
1.50%
1.58%
1.67%

142500
30
No. of months
360
360
360
360
360
360
360
360
360
360
360

Pmt amount
$1,250.54
$1,357.06
$1,465.77
$1,576.33
$1,688.44
$1,801.83
$1,916.28
$2,031.59
$2,147.60
$2,264.17
$2,381.20

Question 6

If you want to "buy down" the interest rate from 10% to 9% in plan

Amount

142500
10%
30

PMT
For 9%
Amount

142500
9%
30

PMT

Difference between 10% and 9% PMT amount =


So extra amount for the down payment can be calculated by finding the present value of the difference amount
PMT diff
Rate
term
Extra Down Payment

103.95
10%
30

erest rate from 10% to 9% in plan A, how much extra down payment would you have to make?

0.0083333333
360
$1,250.54

0.0075
360
$1,146.59

$103.95

lue of the difference amount

0.0083333333
360
$11,845.19