finance tutor 1

Running Head: FINANCE

Financial Crisis

Walter Frazier

FIN 100

Professor Fatma Ahmad

January 22, 2017

Unfortunately, due to rapidly rising housing prices during the decade prior to 2006, many home buyers needed increasingly larger loans to make their real property purchases. For example, a $200,000 fixed-rate mortgage loan would result in a much higher monthly payment compared to a $100,000 loan. Rework the above financial calculator spread sheet solutions using a PV of – 200000. The resulting doubling of the monthly payment to $1,199.10 means that fewer potential home buyers could qualify for these larger loans.

P6

FV = PV * (1+r)^n;

1. 5000 = PV * (1+0.05)^10; 5000 = PV * (1.05)^10; PV = 5000/((1.05)^10); PV = $3,069.57

2. 5000 = PV * (1+0.07)^7; 5000 = PV * (1.07)^7; PV = 5000/((1.07)^7); PV = $3,113.75

3. 5000 = PV * (1+0.09)^4; 5000 = PV * (1.09)^7; PV = 5000/((1.09)^4); PV = $3,542.13

P9

FV = PV * (1+r*n);

FV = 5000 * (1+0.1*5); FV = 5000 * 1.5; FV = $7,500

P10

PV = FV/((1+r)^n)

PV = 3000/((1+0.04)^1); PV = 3000/1.04; PV = $2,884.62

PV = 3000/((1+0.04)^2); PV = 3000/1.04; PV = $2.773.67

P11

PV = FV/((1+r)^n)

PV = 3000 *

P12

Monthly payments = $11122.22; annual payment = $133,466.64

P13

Monthly payments = $380.44; annual payments = $4,565.28

P15

1. 85*8 + 1000 = $1,680; PV = 1680/((1+0.085)^8); PV = $874.72

2. PV = 1680/((1+0.1)^8) = $783.73

3. PV = 1680/((1+0.08)^8) = $907.65