Dayo borrows $24,950,000.00 which she will repay by making interest only payments over 14 years. The interest rate on the loan is i(52) = 3.875%. She is also required to set up a sinking fund that will be used to pay the principal at maturity, and that the bank will sieze in case of default. The interest rate on the sinking fund is i(2) = 8.000%. Payments on both the loan and the sinking fund will be made semi-annually. The bank will reinvest the interest payments at an interest rate of i(26) = 4.125%.Dayo defaults on the loan after 4 years (just after making both her loan payment and sinking fund deposit). a) The sinking fund payment is: b) The amount in the sinking fund at the time of default is: c) The amount in the reinvestment account at the time of default is: d) The ROI for the bank at the time of default is:
Dayo borrows $24,950,000.00 which she will repay by making interest only payments over 14 years. The interest rate on the loan is i(52) = 3.875%.
She is also required to set up a sinking fund that will be used to pay the principal at maturity, and that the bank will sieze in case of default. The interest rate on the sinking fund is i(2) = 8.000%.
Payments on both the loan and the sinking fund will be made semi-annually. The bank will reinvest the interest payments at an interest rate of i(26) = 4.125%.
Dayo defaults on the loan after 4 years (just after making both her loan payment and sinking fund deposit).
a) The sinking fund payment is:
b) The amount in the sinking fund at the time of default is:
c) The amount in the reinvestment account at the time of default is:
d) The ROI for the bank at the time of default is:
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