FP 101 Week 5 Buying Major Assets Worksheet

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FP 101 Week 5 Buying Major Assets Worksheet
FP 101 Week 5 Buying Major Assets Worksheet
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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

  1. 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

 

  1. In a minimum of 100 words, explain the main benefits and drawback of renting and of owning a home?

 

  1. Review Exhibit 7-4. In at least 100 words, summarize the steps in the home-buying process.

 

  1. 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

  1. Review Exhibit 6-2. In at least 100 words, summarize the steps in the car-buying process.

  2. 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 199Enter 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 199Enter 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