Bernie Madeoff pays $230,000 for a new? four-bedroom 2,400-square-foot home outside? Tonopah, Nevada. He plans to make a 20?% down? payment, but is having trouble deciding whether he wants a 15?-year fixed rate (6.396%) or a 30?-year fixed rate (6.877%) mortgage.
a. What is the monthly payment for both the 15?-and 30?-year mortgages, assuming a fully amortizing loan of equal payments for the life of the? mortgage?
b. Assume that instead of making a 20?% down? payment, he makes a 10?% down? payment, and finances the remainder at 7.121% fixed interest for 15 years. What is his monthly? payment?
c. Assume that the? home's total value falls by? 25%. If the homeowner is able to sell the? house, but now at the new home? value, what would be his gain or loss on the home and mortgage assuming all of the mortgage principal? remains? Use the same assumptions as in part a.