Suppose your firm is seeking a four year, amortizing $260,000 loan with annual payments and your bank is offering you the choice between a $268,000 loan with a $8,000 compensating balance and a $260,000 loan without a compensating balance. The interest rate on the $260,000 loan is 9.8 percent. How low would the interest rate on the loan with the compensating balance have to be for you to choose it? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Interest rate %

Suppose your firm is seeking a four year, amortizing $260,000 loan with annual payments and your bank is offering you the choice between a $268,000 loan with a $8,000 compensating balance and a $260,000 loan without a compensating balance. The interest rate on the $260,000 loan is 9.8 percent. How low would the interest rate on the loan with the compensating balance have to be for you to choose it? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Interest rate %

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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In terms of paying less in interest, which is more economical for a $140,000 mortgage: a 30-year fixed-rate at 9.5% or a 15-year fixed-rate at 9%? How much is saved in interest?... The buyer will save in interest approximately $... (Do not round until the final answer. Then round to the nearest thousand dollars.) Use the following formula to determine the regular payment amount. PMT=Prn1−1+rn−nt
43.
You have agreed to loan some money to a friend at a simple interest rate of 62% your friend needs a $1470 loan you tell him to pay you back $3200.When should you tell him to pay you back if you want to hold that interest rate of 62%?
You have a loan outstanding. It requires making three annual payments at the end of the next three years of $1000 each. Your bank has offered to restructure the loan so that instead of making the three payments as originally agreed, you will make only one final payment at the end of the loan in three years. If the interest rate on the loan is 5%, what final payment will the bank require you to make so that it is indifferent between the two forms of payment?
Suppose you take out a $37,000 4-year balloon loan from a bank at an interest rate of 9.8%. What will be the balloon payment at the end of the loan term? Round to the nearest dollar.
You borrow $2mn at an interest rate of 5% per year to purchase a real estate property for the cost of $2.5mn. The borrowing costs are due only at the end of the year. 1). At what property price is it optimal to default on the loan when the borrowing rate is 1%, 5% and 10%?2). Consider three different interest rates of 1%, 5% and 10% and different equity shares of 5%, 20% and 50%. Discuss how the different interest rates and leverage affect the return on equity.
Which of the following statements is most correct? The first payment under a 3-year, annual payment, amortized loan for $1,000 will include a smaller percentage (or fraction) of interest if the interest rate is 5 percent than if it is 10 percent. If you are lending money, then, based on effective interest rates, you should prefer to lend at a 10 percent nominal, or quoted, rate but with semiannual payments, rather than at a 10.1 percent nominal rate with annual payments. However, as a borrower you should prefer the annual payment loan. The value of a perpetuity (say for $100 per year) will approach infinity as the interest rate used to evaluate the perpetuity approaches zero. Statements a, b, and c are all true. Statements b and c are true.
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?
Suppose that five years ago you took a fixed-rate mortgage on your home for $150,000 at 7.75% for 30 years, monthly payments. Today the mortgage rate on 25-year fixed-rate mortgages is 7.20% and you are considering refinancing. The existing loan does not have a prepayment penalty but lenders are charging 4.00% financing costs on new loans. Your opportunity investment rate is 8.5%. a. If you plan to hold the mortgage financing for the next 25 years (whether you refinance or not), what is the NPV of refinancing? Assume that you would refinance the payoff of the existing loan and the new loan amortization would be for 25 years. b. What is the NPV of refinancing if you refinance the payoff of the existing loan for 25 years but you plan to hold the financing for only eight more years?
(Q) You would like to purchase a home and are interested to find out how much you can borrow. When your lender calculates your debt to income ratio, he determines that your maximum monthly payment can be no more than $3, 200. You would like to have a 30 year fully amortizing loan and the interest rate offered on such a loan is currently 8.5%. Given these constraints, what is the largest loan you can obtain?
a) Suppose you have $10,000 to invest in a savings account, and you have two investment options available to you. Option A is a savings account that pays an annual interest rate of 5% with compounding annually, while option B is a savings account that pays an annual interest rate of 4.5% with compounding quarterly. Both options have a 5-year term. Which option should you choose to maximize your return on investment? Why? b) Which factor do you think played a critical role in your investment decision making?
A borrower is purchasing a property for $180,000 and can choose between two possible loan alternatives. The first is a 90% loan for 25 years at 9% interest and 1 point and the second is a 95% loan for 25 years at 9.25% interest and 1 point. Assuming the loan will be held to maturity, what is the incremental cost of borrowing the extra money? O 12.01% O 14.34% 13.50% O 13.66%

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