It is a custom that Banks reduce the interest on the loan if interest rates declined in the country before .the loan was fully repaid Taking this opportunity Fareed decided to borrow $13000 from the bank, which he will repay in six equal end-of-year payments at 8%. Later, At the end of 3 years, at the time of the third payment, the bank reduced the interest rate from 8% to 7% on the .remaining debt As a result, the amount of the equal annual end-of- year payments for each of the first 3 years and the amount of the equal annual end-of-year payments :for each of the last 3 years are

It is a custom that Banks reduce the interest on the loan if interest rates declined in the country before .the loan was fully repaid Taking this opportunity Fareed decided to borrow $13000 from the bank, which he will repay in six equal end-of-year payments at 8%. Later, At the end of 3 years, at the time of the third payment, the bank reduced the interest rate from 8% to 7% on the .remaining debt As a result, the amount of the equal annual end-of- year payments for each of the first 3 years and the amount of the equal annual end-of-year payments :for each of the last 3 years are

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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Melvin Indecision has difficulty deciding whether to put his savings in Mystic Bank or Four Rivers Bank. Mystic offers 10% interest compounded semiannually. Four Rivers offers 8% interest compounded quarterly. Melvin has $10,000 to invest. He expects to withdraw the money at the end of 4 years.Calculate interest for each bank and identify which bank gives Melvin the better deal? (Use the Table provided.) (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)
a) A bank made a 4-year 12% amortizing $2,500,000 loan with equal payments. What is the amount of interest and principal paid at the end of the 3rd year? What is the balance on the loan at the end of the 3rd year? b) Assume instead the bank demands that the borrower pay interest only for the first two years and then principal payments of $1,250,000 in years 3 and 4. What is the amount of interest and principal paid at the end of the 3rd year? What is the balance on the loan at the end of the 3rd year? Assume the same 12% rate of interest. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac).
A bank makes a 5-year $75,000 loan with no principal payments in years 1-2 and principal payments of $25,000 in Years 3, 4 and 5. The interest rate is 8% and will be paid every year. What interest and principal is paid in year 4 A $6,000 + $25,000 B $6,000+$50,000 C $4,000+$25,000 D $4,000+$50,000
Darnell receives a portion of his income from his holdings of interest-bearing U.S. government bonds. The bonds offer a real interest rate of 4% per year. The nominal interest rate on the bonds adjusts automatically to account for the inflation rate. The government taxes nominal interest income at a rate of 20%. The following table shows two scenarios: a low-inflation scenario and a high-inflation scenario. Given the real interest rate of 4% per year, find the nominal interest rate on Darnell's bonds, the after-tax nominal interest rate, and the after-tax real interest rate under each inflation scenario. Inflation Rate Real Interest Rate Nominal Interest Rate After-Tax Nominal Interest Rate After-Tax Real Interest Rate (Percent) (Percent) (Percent) (Percent) (Percent) 2.5 4.0 8.5 4.0 Compared with higher inflation rates, a lower inflation rate will the after-tax real interest rate when the government taxes…
Company A is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or taking out a loan. They owe the supplier $23345, and they can borrow the money from Bank A, which has offered to lend the firm $23345 for 2 month(s) at an APR (compounded) of 15%. The bank will require a (no-interest) compensating balance of 7% of the face value of the loan and will charge a $216 loan origination fee, which means Hand-to-Mouth must borrow even more than the $23345. Compute the EAR of the loan. Give typing answer with explanation and conclusion
Shawn Bixby borrowed $29,000 on a 120-day, 8% note. After 55 days, Shawn paid $3,200 on the note. On day 95, Shawn paid an additional $5,200. Use ordinary interest. a. Determine the total interest use the U.S. Rule. Note: Do not round intermediate calculations. Round your answer to the nearest cent. Total interest b. Determine the ending balance due use the U.S. Rule. Note: Do not round intermediate calculations. Round your answer to the nearest cent. Ending balance due
The Electric Car Corporation borrowed $3,000,000 from the Bank of Walnut Creek on October 1, 2021. The loan was from an SBA (Small Business Administration) program that required interest only payments annually at the low rate of 1.75%. At the end of 5 years, on October 1, 2026 the entire loan of $3,000,000 must be repaid. In the event it is not repaid, the interest rate of 1.75% will be increased retroactively at a rate of 7.5%. In order to assure that the loan can be repaid on October 1, 2026, the Chief Financial Officer wants to set up a special fund to contribute to each and every year in order to have sufficient funds to repay the loan in full on October 1, 2026. The Investment firm of J. Edward and Associates of Emeryville, California has an investment fund available that has an annual fixed return of 5%. The Electric Car Corporation wants to start making an annual deposit to the fund beginning in one year starting on October 1, 2022, and for each of the next three years of…
Delos borrowed 200 million two years ago. The loan agreement, an amortizing loan, was for 5 years at 7625% interest per annum. Delos has saccessfully completed two years of debt-service, but now wishes to renegutiate the terms of the loan with the lender to reduce its ansual payments. a. What were Delos's annual principal and interest payments under the original loan agreement?
Dr Musonda is struggling to repay his loan of K600,000 with payments of K12,800made monthly in arrears for 5 years.After exactly one year, a loan company offers to “help” Dr Musonda by restructuring his loan with new monthly payments of K9,000 made in arrears.(i) Assuming the company charges the same APR as Dr Musonda’s original loan,calculate the term of the new loan.(ii) Calculate how much more interest in total Dr Musonda will pay on his restructured loan than on his original loan.
Tedros borrowed $2 million and planned to repay the loan by making equal month-end payments over a period of 10 years. The interest rate on the loan is 6%, compounded monthly. Immediately after the 60th repayment, the central bank increased the market interest rate and the bank subsequently raised the loan's interest rate to 8% p.a., compounded monthly. If Tedros decides to keep the number of remaining payments unchanged, what is the size of the new monthly repayments?

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