Answered: Given an interest rate of 4% and a term…

Business

Finance

Given an interest rate of 4% and a term of 20 years, how much could the city borrow if they paid $1M/ year in payment?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 14P

See similar textbooks

Related questions

Q: A company wants to have $50,000 at the beginning of each 6-month period for the next 4.5 years. If…

A: Final amount = $50,000Time = 4.5 years Rate = 6.23% compounded semi-annually

Q: A 20 year loan of $100, 000 at i = 6% is paid off by paying 125% of each year’s interest at the end…

A: Term of Loan20yearsLoan amount100000Interest rate6%

Q: A loan of $50,000 is due 10 years from today. The borrower wants to make monthly payments at the end…

A: The payments made constantly without any uneven time gap are called annuity where nominal amount for…

Q: What is the present value of an annuity that pays $58 per year for 13 years and an additional $1,000…

A: We can make use of the financial calculator to obtain the present value, PV. Inputs: I/Y = rate =…

Q: An investment pays an annual cash flow of $1 forever. The appropriate discount rate is 4% per year.…

A: Annual cash flow (C) = $1Discount rate (r) = 0.04Present value = ?Present value will be the…

Q: Explain the nature of the potential lending losses associated with each of the following: default…

Q: Given a loan of $48,000 for three years with a rate of 10%, what are the total finance charges?…

A: Interest Charge - Interest is the fixed some of money to be paid on borrowing amount. Borrowing…

Q: How long will you take to pay a debt of $750,000 using annual interest rate of 10% and annual…

A: According to the time value of money concept, the value of money on the future date will be less…

Q: What is the present value of a stream of payments where the Year 1 payment is $120,000 and the…

A: The objective of the question is to calculate the present value of a growing annuity. A growing…

Q: What is the present value of a 15 year annuity with the first payment of $65,000 (all payments are…

A: present value of a 15 year annuity with the first payment of $65,000 (all payments are the same…

Q: Suppose you wish to borrow Php 20,000,000 to buy a parcel of real estate. The lender is willing to…

A: The mortgage payment are amortize over 10 years as per the schedule shown in excel.

Q: A pension fund must pay out $1 million next year, $2 million the following year, and then $3 million…

A: Solution:Duration refers to that point of time where reinvestment risk equalizes the interest rate…

Q: A company wants to have $40,000 at the beginning of each 6-month period for the next 4.5 years. If…

A: The given problem is on Annuity due Annuity due is an annuity whose payment is due immediately at…

Q: A company wants to have $50,000 at the beginning of each 6-month period for the next 4+1/2 years. If…

A: Final amount = $50,000Time = 4.5 years Rate = 6.23% compounded semi-annually

Q: A state lotto has a prize that pays $1,700 each week for 15 years. Find the total value of the…

A: The given problem relates to concept of annuity. An annuity is a series of uniform cash flows over a…

Q: Consider a five-year floating rate loan with principal of $10 million and quarterly payments based…

A: Given information: 5 year floating rate loan of $10 million

Q: An investment will provide after-tax revenue of $22,336 per year for 7 years. What is the present…

A: After tax revenue (P) of $22,336 for a period (n) of 7 years will be received. Present value annuity…

Q: How much must be invested at the beginning of each year at 11%, compounded annually, to pay off a…

A: The problem relates to ANNUITY DUE. Annuity due is an annuity whose payment is due immediately at…

Q: With an interest rate of 14.5% compounded annually, how much will be required in 10 years to repay a…

A: To determine the amount that will be needed after 10 years to repay the loan received today, we need…

Q: please answer with details on how to do it. Thank you. If a one-time amount of $10,000 is invested…

A: Future amount in case of compounding can be calculated as: = Principal * ( 1 + rate) ^ number of…

Q: What is the maximum amount you should pay today for an investment that pays a single future cash…

A: Future cash flow (FV) = $25000 Interest rate = 2% Semi annual interest rate (r) = 2%/2 = 1% Period =…

Q: A $3,000,000 apartment complex loan is to be paid off in 10 years by making 10 equal annual…

A: Solution:- When a loan is taken, the borrower has to repay the debt either in equal installments or…

Q: What would you pay for an investment that pays you $4300000 after twenty years? Assume that the…

A: Principal amount invested now will become certain amount after certain period of time at specific…

Q: 6,000,000 apartment complex loan is to be paid off in 10 years by making 10 equal annual payments.…

A: We need to use present value of ordinary annuity formula to calculate yearly payment PMT…

Q: How much do you have to deposit today so that beginning 11 years from now you can withdraw $12,000…

A: Given, Amount that can be withdrawn from years 11 to 16 is $12000 Additional amount at end of 16 th…

Concept explainers

Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.

Question

Given an interest rate of 4% and a term of 20 years, how much could the city borrow if they paid $1M/ year in payment?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction

VIEW

Step 2: Computation of Present Value of Borrowing:

VIEW

Solution

VIEW

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

How much must be invested now to receive $50,000 for 8 years if the first $50,000 is received in one year and the rate is 10%?
A borrower looking to borrow $100,000 can obtain an 80 percent loan with an 8 percent interest rate and monthly payments. The loan is to be fully amortized over 25 years. Alternatively, he could obtain a 90 percent loan at an 10 percent rate with the same loan term. What is the incremental ANNUAL cost of borrowing the additional funds? 20.13 17.42 23.98 18.19
How much would you have to pay each year to pay off a 5%, 7-year loan of $300,000?
A loan of 2000 is taken now and is agreed to be repaid as follows: annual payments of 200 each for as long as possible and a final payment of 200+ X where X < 200; the first payment is due 10 years from now. The effective annual rate is 4%. a) How many payments of 200 are made? b) What is the amount of the final payment?
A borrower can obtain an 80% loan with an 8% interest rate and monthly payments. The loan is to be fully amortized over 25 years. Alternatively, he could obtain a 90% loan at an 8.5% rate with the same loan term. The borrower plans to own the property for the entire loan term. solve with finanical calucltor What is the incremental cost of borrowing the additional funds? How would your answer change if 2 points were charged on the 90% loan? Would your answer to part (b) change if the borrower planned to own the property for only 5 years?
A $6,000,000 apartment complex loan is to be paid off in 10 years by making 10 equal annual payments. How much is each payment if the interest rate is 7.5% compounded annually? (a) State the type. ordinary annuity sinking fund amortization present value of an annuity present value (b) Answer the question. (Round your answer to the nearest cent.)
Darby Hospital is borrowing $81 million for its medical office building. The annual interest rate is 4%. What will be the equal annual payments on the loan if the length of the loan is 4 years and payments occur at the end of each year?[x]
Assume annual car payments of $6000 for 4 years and an interest rate of 9% per year. What initial principal or PW will this repay?
Using a spread sheet, calculate the annual payments on a loan for $ 100,000, 10-year loan, 5% per year interest. Then build an amortization schedule for this loan. Develop an amortization for a $100, 000 loan, 5% interest, the annual payments will begin at $4,000 and increase by $1,000 per year until the loan is paid. Then answer this question: How many years will it take to pay off this loan?
A bank is negotiating a loan. The loan can either be paid off as a lump sum of $140,000 at the end of five years, or as equal annual payments at the end of each of the next five years. If the interest rate on the loan is 10%, what annual payments should be made so that both forms of payment are equivalent? A.
A $3,000,000 apartment complex loan is to be paid off in 10 years by making 10 equal annual payments. How much is each payment if the interest rate is 7.5% compounded annually? (a) State the type. A. present valueB.sinking fund C.present value of an annuityD.amortizationE.ordinary annuity (b) Answer the question. (Round your answer to the nearest cent.)
A loan of P30,000 is to be repaid monthly for 5 years that will start at the end of 4 years. If interest is 12% converted monthly, how much is the monthly payment? (Draw the cash flow diagram; indicate the artificial payments and the actual payments.)