Questions critical thinking

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Qnevhf1987

Business Finance

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1. What is the purpose of requiring that a borrower make a down payment before receiving a loan? 2. What kind of insurance do lenders usually require of borrowers who have less than an 80% loanto- value ratio? 3. Interpret what is meant when a lender quotes the terms on a loan as “floating with the T-bill plus 3 with caps of 1 and 5.” 4. Compute the required monthly payment on a $150,000 30-year fixed-rate mortgage with a nominal interest rate of 8%. What is the balance due at the end of the first year? 5. Refer to problem 4. What is the total amount of interest paid over the life of the loan? 6. A mortgage on a house worth $350,000 requires what down payment to avoid PMI insurance?
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Explanation & Answer

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1. What is the purpose of requiring that a borrower make a down payment before receiving
a loan?
This shows that if borrower decides not to make payments on the loan, the asker will accept
some investment loss. Therefore it increases the lchance that the borrower will contin...


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