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FP 101 Week 5 Buying Major Assets Worksheet
Complete the Buying Major Financial Assets Worksheet.
Submit your assignment to the Assignment Files tab.
Buying Major Financial Assets Worksheet
Home Buying
- Complete the “Buy or Rent” calculator using your own data. In 50-100 words answer the following: What was the recommendation? What were the factors that led to that recommendation? Do you agree or disagree with the recommendation? Why?
http://www.bankrate.com/calculators/mortgages/rent-or-buy-home.aspx
- In a minimum of 100 words, explain the main benefits and drawback of renting and of owning a home?
- Review Exhibit 7-4. In at least 100 words, summarize the steps in the home-buying process.
- Review Exhibit 7-6. Estimate the affordable monthly mortgage payment, the affordable mortgage amount, and the affordable home purchase price for the following situation.
- Monthly gross income: $2,950
- Other debt, monthly payment: $160
- Down payment to be made: 15% of purchase price
- Monthly property tax and insurance: $210
- 30 year mortgage at 6%
Enter your calculation and response in this column | |
Step 1. Determine the monthly gross income (annual income divided by 12). | |
Step 2. Multiply step 1 by 33% for a PITI (principal, interest, taxes, and insurance) guideline. NOTE: With a down payment of at least 5% lenders use 33% of the gross income as a guide for PITI (principal, interest, taxes, and insurance) | |
Step 3. Subtract other debt payments from the result of Step 2 to determine the Affordable Monthly Mortgage Payment. | |
Step 4. Divide the result of Step 3 by 6.00 (this is the mortgage payment factor from Exhibit 7-7 based on a 30 year loan at 6%) and then multiply this by $1,000. This is the Affordable Mortgage Amount. | |
Step 5. Divide the affordable mortgage amount by .85 (This is 1 minus the down payment percentage) to determine the Affordable Home Purchase. |
Car Buying
- Review Exhibit 6-2. In at least 100 words, summarize the steps in the car-buying process.
- Using the framework on page 199, prepare a financial comparison of buying and leasing a car with a cash price of $24,000. Show your calculations.
- Down payment (to buy/finance): $4,000
- Monthly loan payment: $560
- 48 month loan and lease
- Value of vehicle at end of loan: $7,200
Instruction: Complete the chart below to calculate the cost of buying a car.
Steps to Buying a Car taken from “Figure it Out” on page 199 | Enter your calculation and response in this column |
Step 1. Total down payment | |
Step 2. Total cost of payments: Multiply the Monthly Loan Payment by the Length of the Loan | |
Step 3. Identify the opportunity cost of the security deposit: Multiply the Security deposit by the Length of the Loan by 3% | |
Step 4. Add the result of Step 1, 2 and 3. | |
Step 5. To determine the total cost of buying subtract the Value of the vehicle at the end of the loan from the result of Step 4. |
Instruction: Complete the chart below to calculate the cost of leasing a car.
- Security deposit (to lease): $1,200
- Monthly lease payment: $440
- 48 month loan and lease
- End-of-lease charges: $600
Steps to Leasing a Car taken from “Figure it Out” on page 199 | Enter your calculation and response in this column |
Step 1. Multiply the Monthly Lease Payment by the Length of the Lease | |
Step 2. Identify the opportunity cost of the security deposit: Multiply the Security deposit by the Length of the Lease by 3% | |
Step 3. To determine the total cost of leasing add the results of Step 1 and 2 to the End-of-Lease Charges |