Finance

1-    Jessica’s elderly grandmother has decided to get a reverse annuity mortgage. The current value of the house that she owns (no outstanding mortgage) is $450,000. The bank has a maximum loan to value ratio of 70%. The bank is willing to provide 15 years of monthly income. The current interest rate= 6%.

a.    How much can Jessica’s grandmother expect to receive monthly?

b.    Write an amortization table for the RAM for period 48. (the 48th period only)

c.    How much in total interest will the grandmother pay if she decided to move at end of 10 years?

Jason wants to buy a house worth $ 200,000. Jason has 20% of the value of the house saved up for down payment so that he can avoid paying PMI. Jason is only interested in conventional mortgages with a 20 year term. His bank gives him two choices: pay no points with interest rate = 7% or pay 1.5 point and he could receive a reduction of 0.5% in interest rate. Jason’s job requires him to move to another state at the end of 5 years. Which is Jason’s better option?

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