A new office building was constructed 5 years ago by a consulting engineering firm. At the time the firm obtained the bank loan for ₱10,000,000 with a 20% annual interest rate, compounded quarterly. The terms of the loan called for equal quarterly payments for 10-year period with the right of prepayment at any time without penalty. Due to the internal changes in the firm, it is now proposed to refinance the loan through an insurance company. The new loan is planned for a 20-year term with an interest rate of 24% per annum, compounded quarterly. The insurance company has a one-time service charge of 5% of the balance. This new loan also calls for equal quarterly payments. (a) What is the balance due on the original mortgage (principal) if all payments have been through a full five years? (b) What will be the difference between the equal quarterly payments in the existing arrangement and the revised proposal?
A new office building was constructed 5 years ago by a consulting engineering firm. At the time the firm obtained the bank loan for ₱10,000,000 with a 20% annual interest rate, compounded quarterly. The terms of the loan called for equal quarterly payments for 10-year period with the right of prepayment at any time without penalty. Due to the internal changes in the firm, it is now proposed to refinance the loan through an insurance company. The new loan is planned for a 20-year term with an interest rate of 24% per annum, compounded quarterly. The insurance company has a one-time service charge of 5% of the balance. This new loan also calls for equal quarterly payments. (a) What is the balance due on the original mortgage (principal) if all payments have been through a full five years? (b) What will be the difference between the equal quarterly payments in the existing arrangement and the revised proposal?
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
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A new office building was constructed 5 years ago by a consulting engineering firm. At
the time the firm obtained the bank loan for ₱10,000,000 with a 20% annual interest rate,
compounded quarterly. The terms of the loan called for equal quarterly payments for
10-year period with the right of prepayment at any time without penalty.
Due to the internal changes in the firm, it is now proposed to refinance the loan through an
insurance company. The new loan is planned for a 20-year term with an interest rate of
24% per annum, compounded quarterly. The insurance company has a one-time service
charge of 5% of the balance. This new loan also calls for equal quarterly payments.
(a) What is the balance due on the original mortgage (principal) if all payments have been
through a full five years?
(b) What will be the difference between the equal quarterly payments in the existing
arrangement and the revised proposal?
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