Calculate the present value of the tax savings due to financing the 3 situations below. Use a 22% tax rate. A) A mortgage loan of $ 400,000 with an amortization period of 20 years, the borrowing rate is 7% annual capitalized semi-annually and the payments are monthly. B) A loan of $ 400,000 in the form of a bond with a coupon rate and yield to maturity of 7% (annual capitalized semi-annually), and maturity of 20 years C) A loan of $ 400,000 with constant principal repayments and additional interest, the borrowing rate is 7% annual capitalized semi- annually and the payments are annual over a 20-year amortization period.

Calculate the present value of the tax savings due to financing the 3 situations below. Use a 22% tax rate. A) A mortgage loan of $ 400,000 with an amortization period of 20 years, the borrowing rate is 7% annual capitalized semi-annually and the payments are monthly. B) A loan of $ 400,000 in the form of a bond with a coupon rate and yield to maturity of 7% (annual capitalized semi-annually), and maturity of 20 years C) A loan of $ 400,000 with constant principal repayments and additional interest, the borrowing rate is 7% annual capitalized semi- annually and the payments are annual over a 20-year amortization period.

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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With the following information, compute the net benefit of refinancing: Current loan balance: $200,000 Remaining term: 15 years Interest rate: 6.5% Old loan monthly payment: $1742.22 Expected number of future payments you will make: 72 Interest rate available on a new loan: 4.5% Cost of refinancing:5% of the outstanding balance. what is the resulting net benefit?
An investment pays $4,000 per year at the beginning of each year for the next 4 years and then $6,000 per year at the beginning of each year for the next 6 years. Using a discount rate of 8%, what is the GPV of these payments?
Calculate the annual payment, finance costs, and principal repayments on a $400,000 loan with a 8% interest rate over four years.
Suppose you obtain a 20-year mortgage loan of $196,000 at an annual interest rate of 7.9%. The annual property tax bill is $966 and the annual fire insurance premium is $488. Find the total monthly payment for the mortgage, property tax, and fire insurance. (Round your answer to the nearest cent.)
Suppose that $100,000 is borrowed at 8 percent and is to be repaid in three equal annual installments. Prepare a debt amortization table and show that the net present value of the after-tax cash flows of the debt is zero using the after-tax cost of debt as the discount rate. The tax rate is 40 percent.
Suppose you obtain a 30 year mortgage loan of 197,000$ at an annual interest rate of 8.1%. The annual property tax bill is $967 and the annual fire insurance premium is 495$. Find the total monthly payment for the mortgage, property tax, and fire insurance.
K Consider the following loan. Complete parts (a)-(c) below. An individual borrowed $65,000 at an APR of 5%, which will be paid off with monthly payments of $442 for 19 years. ... a. Identify the amount borrowed, the annual interest rate, the number of payments per year, the loan term, and the payment amount. The amount borrowed is $ %, the number of payments per year is the loan term is years, and the payment amount is $ the annual interest rate is "
Consider a $200,000 loan with fixed monthly payments. Compute the amount of interest savings when the term of the loan is 15 years and the interest rate is 6.2% versus when the term is 30 years and the interest rate is 7.5% assuming that the loan is held until its maturity. Ignore time value of money.
A loan is being repaid by 20 level annual payments of R, where R is three times the amount of interest that accrues during the first year. Find the interest rate of the loan expressed as an effective annual rate.

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