Financial Calculations Related to Lending

Instructions:

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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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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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

• 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