TBTF Bank makes a 3 year interest only loan to AFC Inc of $2,350,000.00. The interest rate on the loan is i(52) = 12.500%, and the paymentswill be made quarterly. TBTF reinvests the payments at an interest rate of i(26) = 14.250%. At maturity, what is TBTF Bank's annual ROI overthe lifetime of the loan? (AFC does not default.)a. 11.289%b. 12.241%C. 13.601%d. 14.009%e. 12.377%

Step 1: The quarterly interest rate We are given that the annual interest rate (i(52)) is 12.500%.…

Answered: TBTF Bank makes a 3 year interest only…

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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ABC Inc. asked your company for a 7-year loan of $50,000. The repayment of the loan will be as follows: ABC will pay $5,000 at the end of Year 1, $10,000 at the end of Year 2, and $15,000 at the end of Year 3, and fixed unspecified cash flow (assume X) at the end of each of the following years (Year 4 through Year 7). Assuming 8% as an appropriate rate of return on low risk but an illiquid 7-year loan. Find out the cash flow that this investment must provide at the end of each of the final 4 years (year 4 to year 7), that is, find out the X?
4. The Bull bank has a $100,000 30 year loan that was made 6 months ago to a homeowner who is making monthly payments to yield an interest rate of 7% compounded monthly. It would like to sell the loan to increase its overall liquidity. a. What is the current balance on the loan? b. What would be the value of this loan to a potential buyer if it was guaranteed to remain outstanding for the entire holding period, assuming the buyer’s RRR was 6% compounded monthly?
Como Company borrowed $5300 from its bank. Como will repay $7800 in five years. What is the approximate interest rate that Como will incur on this loan, assuming annual compounding? Use the future value of $1 table.Excerpt of Future Value of $1 Table Periods 7% 8% 9% 1 1.07000 1.08000 1.09000 2 1.14490 1.16640 1.18810 3 1.22504 1.25971 1.29503 4 1.31080 1.36049 1.41158 5 1.40255 1.46933 1.53862 6 1.50073 1.58687 1.67710 Group of answer choices 32% 7% 9% 8%
The bank issued a $200,000 30-year mortgage (monthly payments) with an annual interest rate of 9.4%, compounded monthly. They just received payment number 109 and have decided to sell the loan. The buyer of the loan expects to receive an annual rate of return equal to 8.80%, compounded monthly. For the original bank that issued the loan, what was the internal rate of return? a.9.36% b.7.03% c.9.69% d.10.42% e.8.80%
Could u help me?
Data Back-Up Systems has obtained a $29,000, 90-day bank loan at an annual interest rate of 15%, payable at maturity. (Note: Assume a 365-day year.) a. How much interest (in dollars) will the firm pay on the 90-day loan? b. Find the 90-day rate on the loan. c. Annualize your result in part b to find the effective annual rate for this loan, assuming that it is rolled over every 90 days throughout the year under the same terms and circumstances. Answers a. The amount of interest on the loan is $___. (Round to the nearest cent.) b. The effective 90-day rate is___%. (Round to two decimal places.) c. The effective annual rate is___%. (Round to two decimal places.)
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SureWin Company owes an amount of debt to a bank and the bank proposed the following annual payments to pay off the debt. Year 0 (Today): 20,000 Year 1: 24,000; Year 2: 30,000; Year 3: 30,000; Year 4: 35,000; (1) If the appropriate interest rate that bank is charging is APR 6% annual compounding, what would be the amount to debt owed today? (2) If SureWin can negotiate with the bank to pay yearly equal instalments over 4 years starting from the end of year 1 with the same 6% annual interest rate, what would be the amount of yearly payment? (3) If the bank accepts SureWin proposal in (2), what would be the interest amount paid to the bank in the first year?
A customer repays a loan of 22,000 that has an effective annual interest rate of 5.15% by making payments of 2,200 at the end of each year for 11 years, followed by payments of 1,000 at the end of each year for as long as necessary, until a final payment of X of less than 1,000, made one year after the last regular payment of 1,000, repays the loan. Find X. a) 208 b) 295 c) 381 d) 468 e) 555
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BNP Paribas has 800 depositors. Each depositor deposits $1,000 into the bank at t=0. BNP Paribas offers its depositors an 8% interest rate. BNP then uses the deposits to make 2 year simple loans at an interest rate of 8%. Depositors of BNP Paribas can either withdraw their deposits at t=1 or t=2. At t=1, BNP can sell its loans at the initial loan values, if needed. Assume that each depositor believes that there are a total of 300 depositors who will withdraw at t=1. How much of loan payments (in $) does each depositor expects the bank to receive at t=2? Round your answer to at least 2 decimal places.

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