Financial Calculations Related to Lending

Instructions:

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question 1 of 3

If the outstanding balance of a mortgage is $52,000 and the house is currently worth $150,000 what is the loan to value ratio?

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1. Bill wants to find the APR of the mortgage on his new house. He is taking out a 30 year loan, and at his interest rate, he will pay a total of $75,432 in interest over that time period. He will pay a $2,000 origination charge and needs an additional $200,000 to pay for the house after his down payment.

2. Bob would like to double check his loan officer's math and know exactly how his mortgage payment was calculated. His mortgage principal is $101,000. His annual interest rate is 4.0% He is taking out a 15 year loan. Apply the loan calculation formula of P { i(1 + i)^n } / { (1 + i)^n - 1 } to solve for his monthly payment.

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About This Quiz & Worksheet

Our aim is to test your understanding of subjects dealing with relevant ratios and formulas involved in lending, specifically for a home.

Quiz & Worksheet Goals

To clarify, you'll be asked about:

  • Loan to value ratio
  • APR calculation
  • The loan calculation formula
  • Appropriate assurances for lenders
  • The relationship between the APR and interest rate

Skills Practiced

  • Interpreting information - verify that you can read information about why the lender might not want a high loan to value ratio and interpret it correctly
  • Information recall - access the knowledge you've gained about the reason the APR is usually higher than a typical interest rate
  • Knowledge application - use your knowledge to answer questions by correctly applying the loan calculation and APR formulas

Additional Learning

You should study our lesson, Financial Calculations Related to Lending, to find out even more about subjects pertaining to:

  • The way lending works
  • Appropriate applications of different formulas
  • Illustrations of each different formula
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