File Preview Discounted Cash Flow Valuation (30 points) You are planning to buy a house. After subtracting the downpayment, closing costs, and fees, you require a loan with a principal of $350,000. Your bank offers a 30-year loan with a fully amortizing structure, monthly payments, and an effective annual rate (EAR) of 6%. Assume the periodic payments of the loan will start on January 1, 2025, and will be paid on the first day of each month. Part I A) For each period obtain the periodic payment, interest, principal payment, and principal outstanding. B) Obtain the total amount paid Part II You know that any payment above the periodic payment given by the fully amortizing loan will count towards repaying the principal, thus reducing the time needed to repay the loan and the total amount paid. You plan to pay $100 above the required amount each month. C) For each period until the loan has been completely repaid, obtain the periodic payment, interest, principal payment, and principal outstanding D) How long does it take you to pay the loan? E) Obtain the total amount paid Part III Your new job awards a discretionary bonus based on performance at the end of each year, and you are confident in your ability to obtain them. Because of this, you plan to pay (in addition to the extra $100 described in part II) one full extra payment each January, starting with January 1, 2026. (periodic payments for each January, starting from 2026 will be 2xA +100) F) For each period until the loan has been completely repaid, obtain the periodic payment, interest, principal payment, and principal outstanding G) How long does it take you to pay the loan? H) Obtain the total amount paid
File Preview Discounted Cash Flow Valuation (30 points) You are planning to buy a house. After subtracting the downpayment, closing costs, and fees, you require a loan with a principal of $350,000. Your bank offers a 30-year loan with a fully amortizing structure, monthly payments, and an effective annual rate (EAR) of 6%. Assume the periodic payments of the loan will start on January 1, 2025, and will be paid on the first day of each month. Part I A) For each period obtain the periodic payment, interest, principal payment, and principal outstanding. B) Obtain the total amount paid Part II You know that any payment above the periodic payment given by the fully amortizing loan will count towards repaying the principal, thus reducing the time needed to repay the loan and the total amount paid. You plan to pay $100 above the required amount each month. C) For each period until the loan has been completely repaid, obtain the periodic payment, interest, principal payment, and principal outstanding D) How long does it take you to pay the loan? E) Obtain the total amount paid Part III Your new job awards a discretionary bonus based on performance at the end of each year, and you are confident in your ability to obtain them. Because of this, you plan to pay (in addition to the extra $100 described in part II) one full extra payment each January, starting with January 1, 2026. (periodic payments for each January, starting from 2026 will be 2xA +100) F) For each period until the loan has been completely repaid, obtain the periodic payment, interest, principal payment, and principal outstanding G) How long does it take you to pay the loan? H) Obtain the total amount paid
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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Question
PART 1 A & B ONLY
Transcribed Image Text:File Preview
Discounted Cash Flow Valuation (30 points)
You are planning to buy a house. After subtracting the downpayment, closing costs, and
fees, you require a loan with a principal of $350,000. Your bank offers a 30-year loan
with a fully amortizing structure, monthly payments, and an effective annual rate (EAR)
of 6%. Assume the periodic payments of the loan will start on January 1, 2025, and will
be paid on the first day of each month.
Part I
A) For each period obtain the periodic payment, interest, principal payment, and
principal outstanding.
B) Obtain the total amount paid
Part II
You know that any payment above the periodic payment given by the fully amortizing
loan will count towards repaying the principal, thus reducing the time needed to
repay the loan and the total amount paid. You plan to pay $100 above the required
amount each month.
C) For each period until the loan has been completely repaid, obtain the periodic
payment, interest, principal payment, and principal outstanding
D) How long does it take you to pay the loan?
E) Obtain the total amount paid
Part III
Your new job awards a discretionary bonus based on performance at the end of
each year, and you are confident in your ability to obtain them. Because of this, you
plan to pay (in addition to the extra $100 described in part II) one full extra payment
each January, starting with January 1, 2026. (periodic payments for each January,
starting from 2026 will be 2xA +100)
F) For each period until the loan has been completely repaid, obtain the periodic
payment, interest, principal payment, and principal outstanding
G) How long does it take you to pay the loan?
H) Obtain the total amount paid
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