In a Fixed-Term, Level-Payment Reverse Mortgage, Sometimes Called a Reverse

question 7

Multiple Choice

In a fixed-term, level-payment reverse mortgage, sometimes called a reverse annuity mortgage, or RAM, a lender agrees to pay the homeowner a monthly payment, or annuity, and expects to be repaid from the homeowner's equity when he or she sells the home or obtains other financing to pay off the RAM. Consider a household that owns a $150,000 home free and clear of mortgage debt. The RAM lender agrees to a $100,000 RAM for 10 years at 6 percent. Assume payments are made annually, at the beginning of each year to the homeowner. Calculate the annual payment on the RAM.

• A) $7,157.35
• B) $7,586.80
• C) $12,817.73
• D) $13,586.80

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Definitions:

Total Resistance

Refers to the cumulative resistance within an electric circuit, affecting the overall current flow.

Series RC

A circuit configuration consisting of a resistor (R) and capacitor (C) connected end-to-end or in series with each other, affecting the circuit's overall impedance.

Voltage Drop

The reduction in voltage across components in an electrical circuit, caused by the impedance or resistance of the components.

Capacitive Reactances

The opposition that a capacitor presents to the flow of alternating current, due to its ability to store and release energy in its electric field.