You just borrowed $800,000 using a 25 year home loan that's interest-only for the first 2 years, and principal and interest (P&I) for the remaining 23 years. The interest rate is 7.2% pa compounding monthly which is not expected to change. Which of the following statements is NOT correct? Select one: a. The effective monthly rate is 0.006 per month, given as a decimal. If the interest rate rises, the IO and P&I monthly payments will rise. b. If the IO term was one year longer so the P&I term was one year shorter, then the monthly payments over the P&I term would be lower. c. The IO loan's perpetuity factor' is 166.666667, while the P&I loan's annuity factor is 134.691997. d. The IO loan payments will be $4,800 per month, rounded to the nearest cent. e. The P&I loan payments will be $5,939.48 per month, rounded to the nearest cent.

You just borrowed $800,000 using a 25 year home loan that's interest-only for the first 2 years, and principal and interest (P&I) for the remaining 23 years. The interest rate is 7.2% pa compounding monthly which is not expected to change. Which of the following statements is NOT correct? Select one: a. The effective monthly rate is 0.006 per month, given as a decimal. If the interest rate rises, the IO and P&I monthly payments will rise. b. If the IO term was one year longer so the P&I term was one year shorter, then the monthly payments over the P&I term would be lower. c. The IO loan's perpetuity factor' is 166.666667, while the P&I loan's annuity factor is 134.691997. d. The IO loan payments will be $4,800 per month, rounded to the nearest cent. e. The P&I loan payments will be $5,939.48 per month, rounded to the nearest cent.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 31P

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