Download presentation

Presentation is loading. Please wait.

Published byKari Canterbury Modified over 2 years ago

1
RBC: Cash Back Mortgage Available on a Variety of Terms Cashback is available on fixed rate mortgages with terms of 4, 5 or 7 years. And the amount of money you receive is based on the size and term of your mortgage - up to 7% of its value. Source: http://www.rbcroyalbank.com/RBC:RCn5mo71A8QAAypuvLU/products/mortgages/ cashback.html

2
RBC: Cash Back Mortgage Cash back Mortgage $100,000 5 year term 25 year amortization 1% cash back on drawdown date 7% APR Conventional Mortgage $100,000 5 year term 25 year amortization 0 cash back on drawdown date 6% APR Assumptions

3
RBC: Cash Back Mortgage To analyze this, we first calculate the correct monthly interest rate for each type (cash back & conventional) All calculations are shown using keystrokes for the HP 10B calculator

4
RBC: Cash Back Mortgage 1 2 nd P/Y (1 Pay/Year) 100,000PV 0FV 25 x 12 = N 0.5750I PMT$700.42 1 2 nd P/Y (1 Pay/Year) 100,000PV 0FV 25 x 12 = N 0.4939I PMT$639.81 Now calculate the monthly payments for each alternative: Cash back MortgageConventional Mortgage

5
RBC: Cash Back Mortgage Now calculate the balance outstanding at the end of the five year fixed rate term for each type of mortgage: First calculate the payment, then: 60Input 2 nd Amort = =$91,044.59 First calculate the payment, then: 60Input 2 nd Amort = =$89,836.71 Cash back MortgageConventional Mortgage

6
RBC: Cash Back Mortgage We can now calculate the implicit interest rate charged by the bank for the cash back option. 1.Calculate the difference in monthly payments 2.Calculate the difference in balance outstanding at the end of the five year fixed term 3.Calculate the implicit interest rate 1 2 nd P/Y (1 Pay/Year) 1,000PV 1,207.88 +/-FV 60.61 +/-PMT 60N I-?

Similar presentations

OK

Q1 The following expression matches the interest factor of continuous compounding and m compounding. Plug r=0.2, m=4 to get x=0.205.

Q1 The following expression matches the interest factor of continuous compounding and m compounding. Plug r=0.2, m=4 to get x=0.205.

© 2017 SlidePlayer.com Inc.

All rights reserved.

Ads by Google

Ppt on economic sectors in india Ppt on asymptotic notation of algorithms meaning Ppt on microcontroller based home security system Ppt on adr and gdr group Ppt on computer languages to learn Ppt on wild animals Ppt on conservation of water resources Ppt on 4 types of sentences Ppt on bill of lading Slide show view ppt on ipad