In a Fixed-Term,level-Payment Reverse Mortgage,sometimes Called a Reverse Annuity Mortgage,or

question 34

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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