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University of Phoenix Material
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?
2. In a minimum of 100 words, explain the main benefits and drawback of renting and of owning a home?
3. Review Exhibit 7-4. In at least 100 words, summarize the steps in the home-buying process.
4. 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 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 | |
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