Your cousin has asked you to help him analyze the cash flows for a $40,000, 3-year loan he is considering taking out. He has two choices for structuring hispayments: levelprincipal or level payments. He has asked you to prepare an amortizationschedule for eachloan structure. Both loans have an APR of 7% and monthly payments. Which loanhas thesmaller payment in month 15?

ConclusionLevel Payments: $1,235.08 (smaller)Level Principal Payments: $1,253.70The loan with level…

Answered: Your cousin has asked you to help him…

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

See similar textbooks

Similar questions

We will use Excel PMT function to calculate the payment Rand then create an amortization schedule for the problem below: The Turners have purchased a house for $250,000. They made an initial down payment of $50,000 and secured a mortgage with interest charged at the rate of 6%/year on the unpaid balance . Interest computations are made at the end of each month . Assume that the loan is amortized over 15 years . Determine the size of each installment such that the loan is amortized at the end of the term Type the raw data of P, r, m, t into cells Calculate i by its definition Calculate n by its definition Calculate R by Excel function PMT. Note : please reference in PMT What will be their total interest payment ?
You are in negotiations to make a 7 - year loan of $31, 000 to DeVille Corporation. To repay you, DeVille will pay $2, 500 at the end of Year 1, $5, 000 at the end of Year 2, and $7,500 at the end of Year 3, plus a fixed but currently unspecified cash flow, X, at the end of each year from Year 4 through Year 7. You are confident the payments will be made, since DeVille is essentially riskless. You regard 8% as an appropriate rate of return on a low risk but illiquid 7 year loan. What cash flow must the investment provide at the end of each of the final 4 years that is, what is X? Select the correct answer. a. $7,037.75 b. $7, 049.05 с. $7, 003.85 d. $ 7,015.15 e. $7,026.45
You are in negotiations to make a 7-year loan of $22,000 to DeVille Corporation. To repay you, DeVille will pay $2,500 at the end of Year 1, $5,000 at the end of Year 2, and $7,500 at the end of Year 3, plus a fixed but currently unspecified cash flow, X, at the end of each year from Year 4 through Year 7. You are confident the payments will be made, since DeVille is essentially riskless. You regard 8% as an appropriate rate of return on a low risk but illiquid 7-year loan. What cash flow must the investment provide at the end of each of the final 4 years, that is, what is X? A.3558.55 B.3,603.35 C.3,580.95 D.3,592.15 E. 3,569.75
Suppose you wish to purchase heavy equipment machinery and a commercial bank will lend you $65,000 for the transaction. The loan will be amortized over 5 years and the nominal interest rate will be 8% payable monthly. Calculate the monthly payment and the annual percentage rate (EAR) of the loan to be amortized.
Suppose you secure a home improvement loan in the amount of $5,000 from a local bank. The loan officer gives you the following loan terms:• Contract amount = $5,000• Contract period = 24 months• Annual percentage rate = 12%• Monthly installment = $235 .37Shown is the cash flow diagram for this loan. Construct the loan payment schedule by showing the remaining balance, interest payment, and principal payment at the end of each period over the life of the loan.
Create an amortization table for a $60,000 loan. We will assume payments are made monthly over 6 years at an interest rate of 4%. a.) First use a formula cell in your spreadsheet to calculate the monthly payment amount. b.) Create an amortization table for the 72 months. Your columns of your amortization table should include payment number, payment amount, interest paid each month, principle paid that month, amount paid on principal total, and the amount of principal remaining.
A fully amortizing CAM loan is made for $132,000 at 6 percent interest for 20 years. Required: a. What will be the payments and balances for the first six months? b. What would payments be for a CPM loan? c. If both loans were repaid at the end of year 5, would the lender earn a higher rate of interest on either loan? Complete this question by entering your answers in the tabs below. Required A Required B Required C What will be the payments and balances for the first six months? (Round your intermediate calculations and final answers to the 2 decimal places.) Month 1 Month 2 Month 3 Total Payment End Balance
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?
Your business requests a 3-month loan for $500,000. What will be the interest paid at the end of the term if the business risk percentage is assessed at 2.0% and LIBOR is at 2.1%?
Suppose you are buying your first condo for $190,000, and you will make a $10,000 down payment. You have arranged to finance the remainder with a 30-year, monthly payment, amortized mortgage at 3.5% nominal interest rate, with the first payment due in one month. What will your monthly payments be? You are not required to show calculations. However to receive credit you must provide the inputs used (N, PMT, FV, I/Y, PV) to solve. If you utilize a template, you can copy and paste the section used in the submission. $808.28 $853.18 $527.78
Suppose you take out a 36-month installment loan to finance a delivery van for $26,100. The payments are $983 per month, and the total finance charge is $9,288. After 25 months, you decide to pay off the loan. After calculating the finance charge rebate, find your loan payoff (in $). (Round your answer to the nearest cent.)
It is important to know how to build an amortization schedule when firms (or individuals) take out bank loans. It all start with calculating the monthly payment using the formula below.using the formula provided, do calculations to confirm the monthly payment for that loan based on the following information Loan amount (P): $60,000 Number of periods (n): 3 years = 36 months Interest (i): 12% per year = 1% per month (should be expressed as 0.01)

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS