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Chapter 6 Review Exercises

Chapter 6 Review Exercises
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  • 7. Finding the Monthly Payment for a Home Equity Loan

    Home equity loans are loans in which a homeowner borrows money using the equity of the home as collateral. The table shows home equity loan rates and terms.

    You choose a term of 144 months for a $50,000 home equity loan. What is the monthly payment?

    • Worked-Out Solution

      For a 144-month loan, the annual percentage rate is 5.99%. This implies that the monthly payment is

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  • 8. Creating an Amortization Table for a Home Equity Loan

    Home equity loans are loans in which a homeowner borrows money using the equity of the home as collateral. The table shows home equity loan rates and terms.

    You choose a term of 144 months for a $50,000 home equity loan. Create an amortization table showing how the balance of the loan decreases.

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  • 9. Finding the Cost of Credit for a Home Equity Loan

    Home equity loans are loans in which a homeowner borrows money using the equity of the home as collateral. The table shows home equity loan rates and terms.

    You choose a term of 144 months for a $50,000 home equity loan. What is the cost of credit for the loan?

    • Worked-Out Solution

      For a 144-month loan, the annual percentage rate is 5.99%. This implies that the monthly payment is

      The total of the 114 payments is

      So, the cost of credit is

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    These comments are not screened before publication. Constructive debate about the information on this page is welcome, but personal attacks are not. Please do not post comments that are commercial in nature or that violate copyright. Comments that we regard as obscene, defamatory, or intended to incite violence will be removed. If you find a comment offensive, you may flag it.
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      `---`   `-`   `-`  `-`  --` `-`   `-`     `     
                                                      
    
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  • 10. Finding the Remaining Balance on a Home Equity Loan

    Home equity loans are loans in which a homeowner borrows money using the equity of the home as collateral. The table shows home equity loan rates and terms.

    You choose a term of 144 months for a $50,000 home equity loan. When is the remaining balance less than one-half of the original loan amount?

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     `-` --`  `-----`   `-` --`    `---`    `-` --`  
                                                     
    
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  • 11. Saving by Reducing APR

    Home equity loans are loans in which a homeowner borrows money using the equity of the home as collateral. The table shows home equity loan rates and terms.

    You choose a term of 144 months for a $50,000 home equity loan. You receive a 0.25% reduction in APR by initiating automatic monthly payments from your checking account. How much do you save over the term of the loan by doing this?

    • Worked-Out Solution

      For a 144-month loan, the annual percentage rate is 5.99%. This implies that the monthly payment is

      The total of the 144 payments is

      With a 0.25% reduction in the annual percentage rate, the monthly payment is

      The total of the 144 payments is

      So, by taking the automatic payment option, you save

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       | ||    / //\ \\  | ' //    \ ` //   | ' //  
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     `--`     `-`   `-`  `-` --`    `-`'    `-` --` 
                                                    
    
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  • 12. Comparing Loans

    Home equity loans are loans in which a homeowner borrows money using the equity of the home as collateral. The table shows home equity loan rates and terms.

    You choose a term of 144 months for a $50,000 home equity loan. Your credit score of 660 is too low to receive the loan. You use the Internet to find the home equity loan options shown. You receive the APR discount, and the term is 10 years. How much more do you pay in interest with Radiance Bank than with Sunny Bank?

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      ______    ______    ______     ___      _____   
     /_   _//  /_   _//  /_____//   / _ \\   |__  //  
     `-| |,-    -| ||-   `____ `   / //\ \\    / //   
       | ||     _| ||_   /___//   |  ___  ||  / //__  
       |_||    /_____//  `__ `    |_||  |_|| /_____|| 
       `-`'    `-----`   /_//     `-`   `-`  `-----`  
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