MATH CLASS 4

GOBC Real Estate • Mortgage Notes

• Accelerated Bi-Weekly (Acc bi wk)
• PIPI Questions

www.GOBCrealestate.com
 MATH CLASS 4- PIPI Questions
ACCELERATED BI-WEEKLY
1. A mortgage loan has a face value of $350,000, an interest rate of J2 = 5.5%, an amortization period of 20 years, a
term of 3 years, and an option to make accelerated biweekly payments. What is the amount of the accelerated bi-
weekly payment rounded up to the next highest dollar?

(1) $1,325 (2) $2,533 (3) $1,198 (4) $2,649

N J =1. # NOM Steps:

IYR PMT = # PYR 1. Find Monthly Pmt
2. Pmt ÷ 2 = Accelerate Pmt
PV # EFF 3. Round up (plug in)

1 PMT # PYR
2
FV # NOM
3
#PYR

2. A mortgage loan has a face value of $315,000, an interest rate of J2 = 4%, an amortization period of 20 years, a
term of 5 years, and an option to make accelerated biweekly payments. What is the amount of the accelerated bi-
weekly payment rounded up to the next highest dollar?

(1) $952 (2) $1,579 (3) $889 (4)$1,698

N J =2. # NOM Steps:

IYR PMT = # PYR 1. Find Monthly Pmt

2. Pmt ÷ 2 = Accelerate Pmt
PV # EFF 3. Round up (plug in)

1 PMT # PYR
2
FV # NOM

#PYR 3

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 MATH CLASS 4- PIPI Questions
3. A mortgage loan has a face value of $370,000, an interest rate of J2 = 5.5%, an amortization period of 20 years, a
term of 3 years, and an option to make accelerated biweekly payments, rounded up to the next highest dollar. If
this option is exercised, what is the outstanding balance owing at the end of the 3-year term?

(1) $232,928.17 (2) $311,500.07 (3) $328,192.44 (4) $317,935.02

N J =3. # NOM
Steps:

IYR PMT = # PYR 1. Find Monthly Pmt

2. Pmt ÷ 2 = Accelerate Pmt
PV # EFF 3. Round up (plug in)
4. Convert to J26
1 PMT 2 # PYR 5. to find OSB (T#N, press FV)
3 6. to find Prin Red (PR) PV – OSB
FV # NOM

#PYR ________3T______
5 3#N (78), press FV (-328,192.43… = OSB)

6 370,000-328,192.43 = 41,807.56 = PR

4. A mortgage loan has a face value of $250,000, an interest rate of J2 = 3.5%, an amortization period of 20 years, a
term of 3 years, and an option to make accelerated biweekly payments, rounded up to the next higher dollar. If this
option is exercised, what is the outstanding balance owing at the end of the three-year term?

(1) $211,500.07 (2) $198,711.49 (3) $181,700.79 (4) $217,949.46

4
N J =4. # NOM
Steps:
IYR PMT = # PYR
1. Find Monthly Pmt
PV # EFF 2. Pmt ÷ 2 = Accelerate Pmt
3. Round up (plug in)
1 2
PMT # PYR 4. Convert to J26
3 5. to find OSB (T#N, press FV)
FV # NOM 6. to find Prin Red (PR) PV – OSB

#PYR ________3T______
5 3#N (78), press FV (-217,949.46… = OSB)

6 350,000- 217,949.46 = 32,050.53 = PR

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 MATH CLASS 4- PIPI Questions
PIPI = BONUSED MORTGAGES
• HINTS: Asks you to find the COST OF FUNDS ADVANCED or the YIELD TO THE LENDER.

• These questions have: COMMISSIONS and FEES in them (commission payable, lawyer’ fees, mortgage fees,
inspection fees, etc) and the answers will be expressed in rates/percentages (%).

• They may also have terms like FACE VALUE and NET VALUE in them.

PIPI – 5 Steps:

1) PMT = Find the payment, round it up, plug it back in (usually using Face Value)

2) I _________T_______ = Timeline ---> N + F

3) PV = PV – overwrite the PV with what the borrower got for the mortgage
(Net Value) or with what the investor was willing to pay

4) IYR = Push IYR

5) Conversion? Expressed how? do they want: J=? or i=?

Amort ≠ Term

5. A mortgage loan with a face value of $150,000 is arranged through a mortgage broker. A commission of $4,000,
appraisal fees of $450, as well as survey and legal fees totaling $700 will be deducted from the face value before the
funds are advanced to the borrower. Calculate the cost of funds advanced to the borrower, expressed as an
effective annual interest rate (J1), if the loan is written at 6.75% per annum, compounded semi-annually, with
monthly payments over a 20-year amortization period and a 5-year term?

N J = ____#NOM

(1) 7.803344% IYR Pmt = ____#PYR

(2) 9.581225%
(3) 7.537423% PV ____#EFF
(4) 8.540452%
PMT Pmt ____#PYR

FV I ________T______ ____#NOM
#N, press FV
#PYR
PV

I A=
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Conversion? T=
 MATH CLASS 4- PIPI Questions
6. A mortgage broker is arranging a partially amortized mortgage loan with a face value of $350,000. The loan contract is to be
written at 6% per annum, compounded monthly. The repayment of the loan is to take place with monthly payments over an
amortization period of 15 years and a 5-year term. The borrower is to receive $336,000 as a result of a broker's commission of
$10,000, a survey fee of $2,500, an appraisal fee of $500, and legal fees of $1,000, all of which are to be deducted from the face
value. Calculate the cost of funds advanced to the borrower, expressed as an effective annual interest rate (J1).

(1) 7.296801% (2) 8.407884% (3) 9.942096% (4) 7.163572%

N J = ____#NOM

IYR Pmt = ____#PYR

PV ____#EFF

PMT Pmt ____#PYR

FV I ________T______ ____#NOM
#N, press FV
#PYR
PV

I A=

Conversion? T=

7. A loan contract was written for a face value of $50,000 at J2 = 10 3/4 % with a 20-year amortization and a five-year term.
Payments were to be made monthly in the amount of $499.76 and the outstanding balance at the end of the term was
$45,167.50. A brokerage fee of $2,000 was deducted from the face value, so the funds actually advanced to the borrower were
$48,000.00. What is the effective annual rate of interest on the funds advanced?

(1) 12.2570937172% (2) 11.0389057614% (3) 11.6180341755% (4) 10.5168632947%

N J = ____#NOM

IYR Pmt = ____#PYR

PV ____#EFF

PMT P ____#PYR

FV I ________T______ ____#NOM
#N, press FV

#PYR PV

I A=

Conversion? T=

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 MATH CLASS 4- PIPI Questions
Amort = Term

8. A mortgage broker is arranging a fully amortized mortgage loan with a face value of $240,000. The loan contract is to be
written at 8% per annum, compounded semi-annually. The repayment of the loan is to take place over 15 years with monthly
payments. The borrower is to receive $228,400 as a result of a broker's commission of $8,000, a survey fee of $2,000, an
appraisal fee of $600, and legal fees of $1,000, all of which are to be deducted from the face value. Calculate the cost of funds
advanced to the borrower, expressed as an effective annual interest rate (j1).

(1) 9.683451% (2)10.556801% (3) 8.996794% (4) 9.051965%

N J = ____#NOM

IYR Pmt = ____#PYR

PV ____#EFF

PMT Pmt ____#PYR

FV I ________T______ ____#NOM
#N, press FV
#PYR
PV

I A=

Conversion? T=
9. A local mortgage broker arranged a mortgage in the amount of $210,000. The borrower has agreed to pay a brokerage fee in
the amount of $7,200 which is to be added to the loan amount, giving a face value of $217,200 for the loan. The mortgage bears
interest at a contract rate of 17 3/4% per annum, compounded semi-annually. The mortgage has an amortization period and
term of 20 years and calls for monthly payments rounded to the next higher cent. If the mortgage is to be sold to an investor
for $225,000 immediately after the loan is initiated, the investor will earn the following nominal interest rate, with semi-
annual compounding:
(1) 17.0265603822% (2) 16.354586295% (3) 16.452236868% (4) 17.7513197783%

N J = ____#NOM

IYR Pmt = ____#PYR

PV ____#EFF

PMT Pmt ____#PYR

FV I ________T______ ____#NOM
#N, press FV
#PYR
PV

I A=
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Conversion? T=
 MATH CLASS 4- PIPI Questions
10. A local mortgage broker arranged a mortgage in the amount of $210,000. The borrower has agreed to pay a brokerage fee
in the amount of $7,200 which is to be added to the loan amount, giving a face value of $217,200 for the loan. The mortgage
bears interest at a contract rate of 4.5% per annum, compounded semi-annually. The mortgage has an amortization period and
term of 20 years and calls for monthly payments. If the mortgage is sold to an investor for $225,000 immediately after the loan
is initiated, the investor will earn the following nominal interest rate, with semi-annual compounding:
(1) 4.083034% (3) 4.162285%
(2) 4.018729% (4) 4.124712%

N J = ____#NOM

IYR Pmt = ____#PYR

PV ____#EFF

PMT Pmt ____#PYR

FV I ________T______ ____#NOM
#N, press FV
#PYR
PV

I A=

Conversion? T=

11. A local mortgage broker has arranged a mortgage in the amount of $240,000. The borrower has agreed to pay a brokerage
fee of $5,000 which is to be added to the loan amount, giving a face value of $245,000 for the loan. The mortgage bears interest
at a contract rate of 8% per annum, compounded quarterly. The mortgage has a term and amortization period of 25 years. The
loan is to be repaid using monthly payments. The equivalent periodic interest rate, expressed as a rate per month on the funds
advanced is:

(1) 0.682361% (3) 0.821546%

(2) 0.752513% (4) 0.514235%

N J = ____#NOM

IYR Pmt = ____#PYR

PV ____#EFF

PMT Pmt ____#PYR

FV I ________T______ ____#NOM
#N, press FV
#PYR
PV

I A=
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Conversion? T=
 MATH CLASS 4- PIPI Questions
12. A mortgage loan with a face value of $100,000 is arranged through a mortgage broker. A commission of $3,500, appraisal
fees of $450, as well as survey and legal fees totaling $600 will be deducted from the face value before the funds are advanced
to the borrower. Calculate the cost of funds advanced to the borrower, expressed as an effective annual interest rate (J1), if the
loan is written at 7.75% per annum, compounded semi-annually, with monthly payments over a 20-year amortization period
and term?

(1) 8.952059% (3) 8.571434%

(2) 8.252225% (4) 9.439884%

N J = ____#NOM

IYR Pmt = ____#PYR

PV ____#EFF

PMT Pmt ____#PYR

FV I ________T______ ____#NOM
#N, press FV
#PYR
PV

I A=

Conversion? T=

13. A mortgage contract with a face value of $75,418.15 requires monthly payments of $1,125 over a 20-year amortization
period. However, the mortgage broker advances only $73,700 after deducting a commission of $1,000, legal fees of $218.15
and an appraisal fee of $500. Calculate the cost of funds advanced for the borrower.

(1) J1 = 19.0781576914% (2) J1 = 18.7709231308%

(3) J1 = 17.5886421665% (4) J1 = 19.3037985931%

N J = ____#NOM

IYR Pmt = ____#PYR

PV ____#EFF

PMT Pmt ____#PYR

FV I ________T______ ____#NOM
#N, press FV
#PYR
PV

I A=

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Training Ltd T= 58
 MATH CLASS 4- PIPI Questions
14. A mortgage contract with a face value of $75,418.15 requires monthly payments of $1,125.00 over a 20-year period.
However, the mortgage broker advances only $73,900 after deducting a commission of $1,000, legal fees of $218.85, and an
appraisal fee of $300. Calculate the cost of funds advanced for the borrower.

(1) J1 = 19.0781576914% (2) J1 = 18.7709231308%

(3) J1 = 18.2458775706% (4) J1 = 19.2405298693%

N J = ____#NOM

IYR Pmt = ____#PYR

IYR Pmt = ____#PYR
PV ____#EFF

PMT Pmt ____#PYR

PV ____#EFF
FV I ________T______ ____#NOM
#N, press FV
#PYR
PMT Pmt ____#PYR
PV

I A=
FV I ________T______ ____#NOM
Conversion? T=
#N, press FV

#PYR
Special

15. The Under Development PV Company is contemplating the purchase of a vacant lot in order to construct a small commercial
center. Construction is to take 10 months and is to be financed by a construction loan. The development company estimates
that it requires almost $400,000 of construction financing such that it will owe the bank $425,000 at the end of 10 months.
Further, it estimates that it will be able to sell the centre at the same time (in 10 months) for $624,000. If the company
purchases the vacant lot for $180,000, what yield on equity (after financing, pre-tax) will they earn expressed as an effective
I A=
annual rate?
(1) 12.1023777584% N J = ____#NOM
(2) 13.5746616733%
(3) 12.7967757174% IYR Pmt =
(4) 11.4787889556% Conversion? T = ____#PYR

PV ____#EFF

PMT ____#PYR

FV ____#NOM

#PYR

A=

T=

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 MATH CLASS 4- PIPI Questions
PIPI Math Law

16. Assume that only $22,500 of the loan's $24,000 face value is advanced to Sam and Sally. The effective annual rate of
interest charged on the funds advanced will be:

(1) less than the effective annual equivalent of the contract interest rate.
(2) equal to the effective annual equivalent of the contract interest rate.
(3) greater than the effective annual equivalent of the contract interest rate.
(4) impossible to determine with the information provided.

17. Given that all other factors are identical, the shorter the term of the contract on a bonused, partially amortized
mortgage (where the bonus is paid by the borrower):

(1) the lower the effective interest rate paid by the borrower.
(2) the higher the effective interest rate paid by the borrower.
(3) the higher the required monthly payment.
(4) the lower the outstanding balance at the term’s end.

Answers: 16(3), 17 (2)

TIMELINE TYPES for PIMPO’s and PIPI’s:

1. Amort = Term; no AGO DO NOTHING We are happy!

2. Amort = Term; with AGO Nuggets only! YL#N only NO FV
3. Amort ≠ Term; no AGO Nuggets + Fries T#N FV
4. Amort ≠ Term; with AGO Nuggets + Fries T#N FV
Plus Nuggets only! YL#N only NO FV

Homework MATH 4:
1. Accelerated Bi-Weekly questions page 62
2. PIPI questions pages 63 - 64
3. Watch the videos for the next class (Math class 5)

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