EnergyMax Engineering constructed a small office building for their firm 5 years ago. They financed it with a bank loan for $450,000 over 15 years at 6% interest with quarterly payments and compounding. The loan can be repaid at any time without penalty. The loan can be refinanced through an insurance firm for 4% over 20 years—still with quarterly compounding and payments. The new loan has a 5% loan initiation fee, which will be added to the new loan. (a) What is the balance due on the original mortgage (20 payments have been made in the last 5 years)? (b) How much will EnergyMax’s payments drop with the new loan? (c) How much longer will the proposed loan run?
EnergyMax Engineering constructed a small office building for their firm 5 years ago. They financed it with a bank loan for $450,000 over 15 years at 6% interest with quarterly payments and compounding. The loan can be repaid at any time without penalty. The loan can be refinanced through an insurance firm for 4% over 20 years—still with quarterly compounding and payments. The new loan has a 5% loan initiation fee, which will be added to the new loan. (a) What is the balance due on the original mortgage (20 payments have been made in the last 5 years)? (b) How much will EnergyMax’s payments drop with the new loan? (c) How much longer will the proposed loan run?
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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EnergyMax Engineering constructed a small office building for their firm 5 years ago. They financed it with a bank loan for $450,000 over 15 years at 6% interest with quarterly payments and compounding. The loan can be repaid at any time without penalty. The loan can be refinanced through an insurance firm for 4% over 20 years—still with quarterly compounding and payments. The new loan has a 5% loan initiation fee, which will be added to the new loan. (a) What is the balance due on the original mortgage (20 payments have been made in the last 5 years)? (b) How much will EnergyMax’s payments drop with the new loan? (c) How much longer will the proposed loan run?
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