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Business Mathematics Brief 12th Edition by Stanley Salzman ,Gary Clendenen, Charles Miller
Edition 12ISBN: 978-0132605540Business Mathematics Brief 12th Edition by Stanley Salzman ,Gary Clendenen, Charles Miller
Edition 12ISBN: 978-0132605540 Exercise 23
CITIGROUP INC.-HOME FINANCING
www.citigroup.com Facts:
• 1812: Founded in New York City
• 1914: Opened first international branch, in Argentina
• 1998: Merged with Travelers Insurance Group
• 2008: Lost $27.7 billion Took funds from government during financial crisis
• 2010: Revenue estimated to fall 40% compared to 2007
Citigroup Inc. (Citi) provides various banking, lending, insurance, and investment services to individual and corporate customers worldwide. It operates more than 7200 branches and 7000 ATMs. Citi had more than $150 billion in credit-card loans outstanding in 2010 in addition to huge volumes of home loans and business loans.
The financial crisis of 2008-10 created very serious problems for Citigroup. To illustrate the nature of some of the problems, we use the example of one family: Tom and Marie Duston purchased their first home in 2008 when home loans were still very easy to get. They bought a beautiful new 4-bedroom, -bath home with a down payment of only $8500.
At the time of the purchase in 2008, the Dustons were told that the interest rate on their ARM loan would reset in 2011, so they knew the payments might increase. However, they were not worried since they assumed that their incomes and also the value of the house would be higher by then. But home prices fell across much of the country in 2008-11, as did the value of their home. By 2011, an appraiser estimated that it was worth only 75% of the original loan balance of $306,500, which they still owed. They were underwater on their home! Find out what the house was worth in 2011 and the amount by which they were underwater.
www.citigroup.com Facts:
• 1812: Founded in New York City
• 1914: Opened first international branch, in Argentina
• 1998: Merged with Travelers Insurance Group
• 2008: Lost $27.7 billion Took funds from government during financial crisis
• 2010: Revenue estimated to fall 40% compared to 2007
Citigroup Inc. (Citi) provides various banking, lending, insurance, and investment services to individual and corporate customers worldwide. It operates more than 7200 branches and 7000 ATMs. Citi had more than $150 billion in credit-card loans outstanding in 2010 in addition to huge volumes of home loans and business loans.
The financial crisis of 2008-10 created very serious problems for Citigroup. To illustrate the nature of some of the problems, we use the example of one family: Tom and Marie Duston purchased their first home in 2008 when home loans were still very easy to get. They bought a beautiful new 4-bedroom, -bath home with a down payment of only $8500.
At the time of the purchase in 2008, the Dustons were told that the interest rate on their ARM loan would reset in 2011, so they knew the payments might increase. However, they were not worried since they assumed that their incomes and also the value of the house would be higher by then. But home prices fell across much of the country in 2008-11, as did the value of their home. By 2011, an appraiser estimated that it was worth only 75% of the original loan balance of $306,500, which they still owed. They were underwater on their home! Find out what the house was worth in 2011 and the amount by which they were underwater.
Explanation
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Since the house was estimated ...
Business Mathematics Brief 12th Edition by Stanley Salzman ,Gary Clendenen, Charles Miller
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