You have just taken out a five-year loan from a bank to buy an engagement ring. The ring costs $5000. You plan to put down $1000 and borrow $4000. You will need to make annual payments of $1000 at the end of each year. Show the timeline of the loan from your perspective. How would the timeline differ if you created it from the bank’s perspective?

Question

Want to see more full solutions like this?

Answer 1

Textbook Question

Chapter 4, Problem 1P

You have just taken out a five-year loan from a bank to buy an engagement ring. The ring costs $5000. You plan to put down $1000 and borrow $4000. You will need to make annual payments of $1000 at the end of each year. Show the timeline of the loan from your perspective. How would the timeline differ if you created it from the bank’s perspective?

Expert Solution & Answer

Summary Introduction

To show: The timeline from Person X’s perspective and the difference in the timeline that is created from the bank’s perspective.

Introduction:

The timing of cash flows that are represented in a linear form is known as a timeline.

Explanation of Solution

Given information:

Person X has just taken a 5-year loan from a bank to purchase an engagement ring. The cost of the ring is $5000. Person X makes a plan to borrow $4000 and put down $1000. Person X has to make the annual payments of $1000 at the end of every year.

Timeline from the perspective of Person X:

Corporate Finance, Chapter 4, Problem 1P

Explanation:

The above timeline describes the perspective of Person X and the timeline is the same for the bank’s perspective. However, the signs are reversed from the bank’s perspective.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

K You have just taken out a five-year loan from a bank to buy an engagement ring. The ring costs $5,500. You plan to put down $1,200 and borrow $4,300. You will need to make annual payments of $1,200 at the end of each year. Show the timeline of the loan from your perspective. How would the timeline differ if you created it from the bank's perspective? Show the timeline of the loan from your perspective. (Select the best choice below.) OA. Year Cash Flow $4,300 0 OB. Year 0 Cash Flow - $1,200 OC. Year Cash Flow $5,500 0 OD. Year 1 - $1,200 1 $1,200 2 Cash Flow - $4,300 $1,200 - $1,200 2 $1,200 - $1,200 - $1,200 2 $1,200 3 - $1,200 3 $1,200 3 - $1,200 3 $1,200 - $1,200 4 $1,200 4 - $1,200 4 $1,200 5 - $1,200 5 $1,200 5 - $1,200 5 $1,200

Suppose you need to borrow $200,000 to buy a home, and you are deciding between a 15 year mortgage and a 30 year mortgage. Research a bank offering 15 year and 30 year mortgage loans and find the interest rates on those loans. Use the techniques you learned in this Module to do the following: 1. Calculate the monthly payment for a 15-year mortgage and for a 30-year mortgage. 2. Find the total amount of interest you will pay on the 15 year mortgage and on the 30 year mortgage. 3. Describe some of the factors (financial and non-financial) that can influence whether to obtain a shorter term mortgage or a longer term mortgage. 4. Which mortgage would you take, the 15 year or the 30 year? Explain your decision.

Please solve this

Answer 2

Textbook Question

Chapter 4, Problem 1P

You have just taken out a five-year loan from a bank to buy an engagement ring. The ring costs $5000. You plan to put down $1000 and borrow $4000. You will need to make annual payments of $1000 at the end of each year. Show the timeline of the loan from your perspective. How would the timeline differ if you created it from the bank’s perspective?

Expert Solution & Answer

Summary Introduction

To show: The timeline from Person X’s perspective and the difference in the timeline that is created from the bank’s perspective.

Introduction:

The timing of cash flows that are represented in a linear form is known as a timeline.

Explanation of Solution

Given information:

Person X has just taken a 5-year loan from a bank to purchase an engagement ring. The cost of the ring is $5000. Person X makes a plan to borrow $4000 and put down $1000. Person X has to make the annual payments of $1000 at the end of every year.

Timeline from the perspective of Person X:

Corporate Finance, Chapter 4, Problem 1P

Explanation:

The above timeline describes the perspective of Person X and the timeline is the same for the bank’s perspective. However, the signs are reversed from the bank’s perspective.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Textbook Question

Chapter 4, Problem 1P

You have just taken out a five-year loan from a bank to buy an engagement ring. The ring costs $5000. You plan to put down $1000 and borrow $4000. You will need to make annual payments of $1000 at the end of each year. Show the timeline of the loan from your perspective. How would the timeline differ if you created it from the bank’s perspective?

Expert Solution & Answer

Summary Introduction

To show: The timeline from Person X’s perspective and the difference in the timeline that is created from the bank’s perspective.

Introduction:

The timing of cash flows that are represented in a linear form is known as a timeline.

Explanation of Solution

Given information:

Person X has just taken a 5-year loan from a bank to purchase an engagement ring. The cost of the ring is $5000. Person X makes a plan to borrow $4000 and put down $1000. Person X has to make the annual payments of $1000 at the end of every year.

Timeline from the perspective of Person X:

Corporate Finance, Chapter 4, Problem 1P

Explanation:

The above timeline describes the perspective of Person X and the timeline is the same for the bank’s perspective. However, the signs are reversed from the bank’s perspective.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Textbook Question

Chapter 4, Problem 1P

You have just taken out a five-year loan from a bank to buy an engagement ring. The ring costs $5000. You plan to put down $1000 and borrow $4000. You will need to make annual payments of $1000 at the end of each year. Show the timeline of the loan from your perspective. How would the timeline differ if you created it from the bank’s perspective?

Expert Solution & Answer

Summary Introduction

To show: The timeline from Person X’s perspective and the difference in the timeline that is created from the bank’s perspective.

Introduction:

The timing of cash flows that are represented in a linear form is known as a timeline.

Explanation of Solution

Given information:

Person X has just taken a 5-year loan from a bank to purchase an engagement ring. The cost of the ring is $5000. Person X makes a plan to borrow $4000 and put down $1000. Person X has to make the annual payments of $1000 at the end of every year.

Timeline from the perspective of Person X:

Corporate Finance, Chapter 4, Problem 1P

Explanation:

The above timeline describes the perspective of Person X and the timeline is the same for the bank’s perspective. However, the signs are reversed from the bank’s perspective.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

Summary Introduction

To show: The timeline from Person X’s perspective and the difference in the timeline that is created from the bank’s perspective.

Introduction:

The timing of cash flows that are represented in a linear form is known as a timeline.

Explanation of Solution

Given information:

Person X has just taken a 5-year loan from a bank to purchase an engagement ring. The cost of the ring is $5000. Person X makes a plan to borrow $4000 and put down $1000. Person X has to make the annual payments of $1000 at the end of every year.

Timeline from the perspective of Person X:

Corporate Finance, Chapter 4, Problem 1P

Explanation:

The above timeline describes the perspective of Person X and the timeline is the same for the bank’s perspective. However, the signs are reversed from the bank’s perspective.

Answer 8

Expert Solution & Answer

Summary Introduction

To show: The timeline from Person X’s perspective and the difference in the timeline that is created from the bank’s perspective.

Introduction:

The timing of cash flows that are represented in a linear form is known as a timeline.

Explanation of Solution

Given information:

Person X has just taken a 5-year loan from a bank to purchase an engagement ring. The cost of the ring is $5000. Person X makes a plan to borrow $4000 and put down $1000. Person X has to make the annual payments of $1000 at the end of every year.

Timeline from the perspective of Person X:

Corporate Finance, Chapter 4, Problem 1P

Explanation:

The above timeline describes the perspective of Person X and the timeline is the same for the bank’s perspective. However, the signs are reversed from the bank’s perspective.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Summary Introduction

To show: The timeline from Person X’s perspective and the difference in the timeline that is created from the bank’s perspective.

Introduction:

The timing of cash flows that are represented in a linear form is known as a timeline.

Answer 12

Explanation of Solution

Given information:

Person X has just taken a 5-year loan from a bank to purchase an engagement ring. The cost of the ring is $5000. Person X makes a plan to borrow $4000 and put down $1000. Person X has to make the annual payments of $1000 at the end of every year.

Timeline from the perspective of Person X:

Corporate Finance, Chapter 4, Problem 1P

Explanation:

The above timeline describes the perspective of Person X and the timeline is the same for the bank’s perspective. However, the signs are reversed from the bank’s perspective.

Answer 13

Ch. 4.1 - Prob. 1CC Ch. 4.1 - Prob. 2CC Ch. 4.2 - Prob. 1CC Ch. 4.2 - Prob. 2CC Ch. 4.2 - Prob. 3CC Ch. 4.3 - Prob. 1CC Ch. 4.3 - Prob. 2CC Ch. 4.4 - Prob. 1CC Ch. 4.4 - What benefit does a firm receive when it accepts a...Ch. 4.5 - How do you calculate the present value of a a....

Videos

Explanation of Solution

Want to see more full solutions like this?

Chapter 4 Solutions