9) You have 2 options to pay off a $100,000 loan and both options have an interest rate of 5% compounded quarterly. Option A will repay the loan with monthly payments (end) over 15 years and Option B will repay it with beginning of the year payments over 20 years. a. Find the size of the monthly payments over 15 years b. Find the size of the beginning of the year payments required over 20 years. c. How much interest (in dollars) is saved with the monthly payments over 15 years versus the year payments over 20 years?

9) You have 2 options to pay off a $100,000 loan and both options have an interest rate of 5% compounded quarterly. Option A will repay the loan with monthly payments (end) over 15 years and Option B will repay it with beginning of the year payments over 20 years. a. Find the size of the monthly payments over 15 years b. Find the size of the beginning of the year payments required over 20 years. c. How much interest (in dollars) is saved with the monthly payments over 15 years versus the year payments over 20 years?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You have been asked by MPAC Ltd to analyse two projects, X and Y. Each project costs £1,000,000, and the company's cost of capital is 10 percent per annum. The expected net cash flows are as follows: Project X £600,000 £500,000 £300,000 £100,000 Project Y £200,000 £300,000 £400,000 £675,000 Year 1 3 4 Required: Calculate the following for each project: i) ii) iii) a) net present value modified internal rate of return discounted payback period b) Which project(s) should be accepted if they are independent? Explain why. c) How might a change in the cost of capital produce a conflict between the net present value and internal rate of return rankings of these two projects? Would this conflict exist if the cost of capital were changed? Why does the conflict exist? Discuss critically.
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