Outline of the case Jessica Hernandez wanted to open a retail outlet in a mall where she could sell gadgets. As her business started to grow, she realized she would soon need to hire one or two people and that will need money to pay for their compensation. In other words, she could not grow her business without borrowing. She plans to borrow $7,600 for 2 years however she doesn't have a very good credit rating so most finance companies want to charge her a high-interest rate. She finally finds a lender that will loan her the money at 12% compounded monthly. Discussion Question: 1. How much interest will Jessica have to pay to the lender? 2. If you were Jessica, will you lend money at a higher interest rate? Why? 3. What other options are available and what should she do, aside from borrowing money. 4. Assume Hernandez has successfully managed her business for several years. List five possible reasons she may still need to borrow from time to time.

Outline of the case Jessica Hernandez wanted to open a retail outlet in a mall where she could sell gadgets. As her business started to grow, she realized she would soon need to hire one or two people and that will need money to pay for their compensation. In other words, she could not grow her business without borrowing. She plans to borrow $7,600 for 2 years however she doesn't have a very good credit rating so most finance companies want to charge her a high-interest rate. She finally finds a lender that will loan her the money at 12% compounded monthly. Discussion Question: 1. How much interest will Jessica have to pay to the lender? 2. If you were Jessica, will you lend money at a higher interest rate? Why? 3. What other options are available and what should she do, aside from borrowing money. 4. Assume Hernandez has successfully managed her business for several years. List five possible reasons she may still need to borrow from time to time.

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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Instructions Answer the journal prompts according to the scenario below: Joe-Bob wants to buy a car and will need to take out a loan in order to make the purchase. His current monthly income is $3,500 per month. His mortgage payment is $900 per month, and his student loan payment is $350 per month. Note: You do not need to take taxes into consideration for this journal. According to the affordability formulas given, can he afford to take out another loan? • When should he follow the affordability formulas? In what cases should he not? • How could taking out the car loan impact his other priorities?
5. Kumal wants to sell her townhouse in Whitehorse. She will spend $2100 updating her home. She has $2100 in cash, but she plans to buy a $2100 RRSP. She will need 120 d to pay off any loan. Interest is compounded daily. a) Complete the chart. Option secured personal loan RRSP loan no loan credit card Detalle Buy the RRSP with $2100 cash. Pay for updating with the loan using her home equity as collateral. Pay for updating with the $2100. Buy an RRSP with an RRSP loan. Pay for updating with the $2100. Do not get an RRSP. Buy an RRSP with the $2100. Pay for updating with a credit card with a 30 d grace period. 1125 APR 2.75% 1.75% 0% 20.1% Total amount A-PH1+ 62 b) Which option should Kumal choose? Explain why. c) Which option should Kumal not choose? Explain why. d) Suppose Kumal uses a RRSP loan instead of her credit card. How much interest will she save? What is equity? What is it used for? Total Interest/A-P REFLECTING Suppose Kumal has a loan with simple interest nstead of compound…
Linda is taking out an amortized loan for $91,000 to open a small business and is deciding between the offers from two lenders.She wants to know which one would be the better deal over the life of the small business loan, and by how much.Answer each part. Do not round intermediate computations, and round your answers to the nearest cent.If necessary, refer to the list of financial formulas. (a) AngeHer credit union has offered her a 8-year small business loan at an annual interest rate of 13.3%. Find the monthly payment.X(b)A savings and loan association has offered her a 9-year small business loan at an annual interest rate of 13.5 %. Find the monthly payment.Suppose Linda pays the monthly payment each month for the full term. Which lender's small business loan would have the lowest total amount to pay off, and by how much? Gredit unionThe total amount paid would be $ less than to the savings and loan association.Try againvings and loan association he total amount paid would be $less…
Ginny, who lives in Houston, is trying to decide between the following car models: Brand and Model Chevy Sonic Toyota Camry Ford Escape Hybrid Dodge 1500 Pickup Cost $14,255 17,950 30,570 37,590 She's currently accumulated a down payment of $5,000 and she has determined that she can afford maximum payments of $375 per month. Her initial research on the current cost of auto loans has found that her lowest cost loan would be made by a bank and would require an interest rate of 6% for five years. Given this information, the maximum amount that Ginny can afford to pay for her new car is can afford to purchase, without stretching her budget, is: OOO The Chevy Sonic The Toyota Camry The Dodge 1500 Pickup The Ford Escape Hybrid I and the most expensive car that she
PIANO LOANS. Stephanie has her eye on a $150,000 Steinway D Grand Piano. Will a cheery major chord or a depressing minor chord best describe her meeting with a loan officer? Use a calculator to do the math after writing out the proper formula. Round to the nearest dollar. Her credit history allows her to qualify for a 6% (APR, compounded monthly) loan that she plans to pay off over the next 15 years. If her earnings allow her to comfortably make monthly payments of $1200, what is the most she can afford to borrow? b. Alternatively, she can qualify for a 6% (APR, compounded monthly), 20-year loan. If she borrows $150,000, then what would her monthly payment be? c. Finally, suppose Stephanie runs up a lot of credit card debt in college, so that she can only qualify for a 9% (APR, compounded monthly), 20-year loan. If she still wants to buy that $150,000 piano, what will her monthly payment be? 4. а.
This is a Debt Coverage Ratio or DCR question for part a and a CAP rate question for part b]. Wendy is going to purchase a commercial building and is working with a commercial lender at her local bank. The bank has some loan parameters that Wendy must follow. Understanding the rules will allow her to calculate her cash, income, and payment projections. The bank requires a 1.4 debt coverage ratio for her project. Wendy needs to calculate her net operating income or NOI first. The debt coverage ratio is based on this number. Then she will apply for a 20 year loan at 5% with annual payments. Information on the property includes: Gross rents- $780,000 Vacancy 5% Salaries $85,000 Other Fixed Expenses $125,000 Variable Expenses 20% of gross rents. NOI=_________________ Use the NOI and Debt Coverage requirement to calculate the answer. What is the largest annual payment the bank will allow? If Wendy had to buy the property at a 6% CAP (capitalization) rate, what is the asking price?
Suppose that you need $30,000 for your last year of college. You could go to a private lending institution and apply for a signature student loan; rates range from 7% to 14%. However, your Aunt Sally is willing to loan you the money from her retirement savings, with no repayment until after graduation. All she asks is that in the meantime you pay her each month the amount of interest that she would otherwise get on her savings (since she needs that to live on), which is 4%.What is your monthly payment to her, and how much interest will you pay her over the year (9 months)?(Fill in the blanks below and give your answers as whole numbers.)The amount of interest per month you would pay Aunt Sally is $__(1)__ .The total interest you will pay her over the year (9 months)is $__(2)__ .
Excited to buy her dream car, Molly rushes into her local Jeep dealership. Molly picks out a car, sits down at the financing desk, and hears the following: "Well, we ran your credit history. You've got a really thin file -- just a year's worth of student loan payments. The deal you saw was for 'well-qualified buyers.' The best deal we can offer you is 6.6% for 60 months. A little more bad news -- the cash allowance is also based on credit history, so you don't qualify for $500. That said, you're excited about a Jeep, and I want to see you driving one, so I can do $400 for you!" 9. Molly still has a $2500 down payment. How much loan does Molly need?
Show Your Work Brian just purchased a home for $300,000 and made the required down payment of 20% ($60,000) to avoid PMI. Therefore, he is financing $240,000 over 30 years (360 months) at 3%. A) How much are his payments on the loan? B) His husband, Greg, is a great financial planner and says it would be very prudent to pay an EXTRA $200 per month on the mortgage payments. How many monthly payments will this “knock off” or reduce on the original 360 payments? How much interest will be saved over the life of the loan by making the extra $200 per month payment?
Bha

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