Given the Following Information on an Interest-Only Mortgage, Calculate the Monthly

question 37

Multiple Choice

Given the following information on an interest-only mortgage, calculate the monthly mortgage payment. Loan amount: $56,000, Term: 15 years, Interest Rate: 7.5%.

• A) $169.13
• B) $350
• C) $519.13
• D) $4,200

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Definitions:

Interest Tax Shield

The reduction in income taxes that results from taking allowable deductions for interest expense.

Tax Shield

The reduction in income taxes that results from taking an allowable deduction from taxable income, such as mortgage interest or depreciation.

Coupon Rate

Yearly rate of interest paid on a bond, expressed in terms of percentage of its face value.

Unlevered Firm

A firm that operates without any debt in its capital structure, using only equity for financing.