EBK CORPORATE FINANCE
4th Edition
ISBN: 9780134202785
Author: DeMarzo
Publisher: VST
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 4, Problem 38P
You would like to buy the house and take the mortgage described in Problem 37. You can afford to pay only $23,500 per year. The bank agrees to allow you to pay this amount each year, yet still borrow $300,000. At the end of the mortgage (in 30 years}, you must make a balloon payment; that is, you must repay the remaining balance on the mortgage. How much will this balloon payment be?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Suppose you take out a $117,000, 20-year mortgage loan to buy a condo. The interest rate on the loan is 5%. To keep things simple,
we will assume you make payments on the loan annually at the end of each year.
a. What is your annual payment on the loan?
b. Construct a mortgage amortization.
c. What fraction of your initial loan payment is interest?
d. What fraction of your initial loan payment is amortization?
e. What is the total of the loan amount paid off after 10 years (halfway through the life of the loan)?
f. If the inflation rate is 3%, what is the real value of the first (year-end) payment?
g. If the inflation rate is 3%, what is the real value of the last (year-end) payment?
h. Now assume the inflation rate is 6% and the real interest rate on the loan is unchanged. What must be the new nominal interest
rate?
i-1. Recompute the amortization table.
i-2. What is the real value of the first (year-end) payment in this high-inflation scenario?
j. What is the real value of the last…
You are thinking of purchasing a house. The house costs
$300,000.
You have
$43,000
in cash that you can use as a down payment on the house, but you need to borrow the rest of the purchase price. The bank is offering a
30-year
mortgage that requires annual payments and has an interest rate of
7%
per year. What will be your annual payment if you sign this mortgage?
The annual payment is
$__________________________
(Round to the nearest dollar.)
You obtain a 30-year home mortgage and your monthly payment is $3000.00. Instead of paying monthly as required, you ask the bank to allow you to pay $36,000 at the end of each year; the bank rejects that idea but says you could pay $36,000 at beginning of each year. Why does the bank reject your proposal and would you accept bank's suggestion
Chapter 4 Solutions
EBK CORPORATE FINANCE
Ch. 4.1 - Prob. 1CCCh. 4.1 - Prob. 2CCCh. 4.2 - Prob. 1CCCh. 4.2 - Prob. 2CCCh. 4.2 - Prob. 3CCCh. 4.3 - Prob. 1CCCh. 4.3 - Prob. 2CCCh. 4.4 - Prob. 1CCCh. 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....
Ch. 4.5 - How are the formulas for the present value of a...Ch. 4.6 - Prob. 1CCCh. 4.6 - Prob. 2CCCh. 4.7 - Prob. 1CCCh. 4.7 - Prob. 2CCCh. 4.8 - Prob. 1CCCh. 4.8 - Prob. 2CCCh. 4.9 - Prob. 1CCCh. 4.9 - Prob. 2CCCh. 4.A - Your grandmother bought an annuity from Rock Solid...Ch. 4.A - Prob. A.2PCh. 4 - You have just taken out a five-year loan from a...Ch. 4 - Prob. 2PCh. 4 - Calculate the future value of 2000 in a. Five...Ch. 4 - Prob. 4PCh. 4 - Your brother has offered to give you either 5000...Ch. 4 - Prob. 6PCh. 4 - Prob. 7PCh. 4 - Your daughters currently eight years old. You...Ch. 4 - Prob. 9PCh. 4 - Prob. 10PCh. 4 - Suppose you receive 100 at the end of each year...Ch. 4 - You have just received a windfall from an...Ch. 4 - You have a loan outstanding. It requires making...Ch. 4 - You have been offered a unique investment...Ch. 4 - Prob. 15PCh. 4 - Prob. 16PCh. 4 - How would your answer to Problem 16 change if the...Ch. 4 - The British government has a consol bond...Ch. 4 - What is the present value of 1000 paid at the end...Ch. 4 - You are head of the Schwartz Family Endowment for...Ch. 4 - When you purchased your house, you took out a...Ch. 4 - Prob. 22PCh. 4 - Your grandmother has been putting 1000 into a...Ch. 4 - A rich relative has bequeathed you a growing...Ch. 4 - Prob. 25PCh. 4 - You work for a pharmaceutical company that has...Ch. 4 - Your oldest daughter is about to start...Ch. 4 - A rich aunt has promised you 5000 one year from...Ch. 4 - You are running a hot Internet company. Analysts...Ch. 4 - Prob. 30PCh. 4 - Prob. 32PCh. 4 - Your firm spends 5000 every month on printing and...Ch. 4 - You have just entered an MBA program and have...Ch. 4 - Your credit card charges an interest rate of 2%...Ch. 4 - You have decided to buy a perpetuity. The bond...Ch. 4 - You are thinking of purchasing a house. The house...Ch. 4 - You would like to buy the house and take the...Ch. 4 - You have just made an offer on a new home and are...Ch. 4 - Prob. 40PCh. 4 - Prob. 41PCh. 4 - You are saving for retirement. To live...Ch. 4 - Prob. 43PCh. 4 - Prob. 44PCh. 4 - Prob. 45PCh. 4 - Prob. 46PCh. 4 - Prob. 47PCh. 4 - Prob. 48PCh. 4 - You are shopping for a car and read the following...Ch. 4 - Prob. 50PCh. 4 - Prob. 51PCh. 4 - The Tillamook County Creamery Association...
Additional Business Textbook Solutions
Find more solutions based on key concepts
Comparison of projects using Net Present Value. Reasons for the conflicts in ranking using Net Present Value an...
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
Explain what is meant by the statement “The use of current liabilities as opposed to long-term debt subjects th...
Foundations Of Finance
The call option on the firm’s assets which leads to agency costs. Introduction: An option is a derivative that ...
Corporate Finance
The call option price. Option: The options are the financial statements that provides its holders an opportunit...
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
(Compound interest uith nonannnal periods)
Calculate the future sum of $5,000, given that it will be held in th...
Foundations of Finance (9th Edition) (Pearson Series in Finance)
Name the five steps in process costing when equivalent units are computed.
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Your mortgage has 21 years left, and has an APR of 8.707% with monthly payments of $1,449. a. What is the outstanding balance? b. Suppose you cannot make the mortgage payment and you are in danger of losing your house to foreclosure. The bank has offered to renegotiate your loan. The bank expects to get $125,507 for the house if it forecloses. They will lower your payment as long as they will receive at least this amount (in present value terms). If current 21-year mortgage interest rates have dropped to 5.660% (APR), what is the lowest monthly payment you could make for the remaining life of your loan that would be attractive to the bank? a. What is the outstanding balance? The outstanding balance is $ (Round to the nearest cent.)arrow_forwardSuppose that you wish to buy a new home that will cost you $452,847. You must put $80,000 down, and the bank offers you a 5-year 5.1% APR negative amortization loan with a payments $1,258 per month, and a balloon payment of $92,233 (your 360th payment). How much will your remaining payments be?arrow_forwardI need a detailed explanation on how to solve this problem: You want to buy a house for $245,000, on a 35-year, fixed rate mortgage. The bank offers you a 420 month, 5.4% APR mortgage. You can only afford to pay $850 per month. But you offer to pay off the remaining balance at the end of the loan in a single balloon payment. - How much will the balloon payment be for you to keep the monthly payment at $850?arrow_forward
- Your mortgage has 22 years left, and has an APR of 9.535% with monthly payments of $1,449. a. What is the outstanding balance? b. Suppose you cannot make the mortgage payment and you are in danger of losing your house to foreclosure. The bank has offered to renegotiate your loan. The bank expects to get $119,799 for the house if it forecloses. They will lower your payment as long as they will receive at least this amount (in present value terms). If current 22-year mortgage interest rates have dropped to 6.198% (APR), what is the lowest monthly payment you could make for the remaining life of your loan that would be attractive to the bank?arrow_forwardYour mortgage has 24 years left, and has an APR of 6.303% with monthly payments of $1,449. a. What is the outstanding balance? b. Suppose you cannot make the mortgage payment and you are in danger of losing your house to foreclosure. The bank has offered to renegotiate your loan. The bank expects to get $161,182 for the house if it forecloses. They will lower your payment as long as they will receive at least this amount (in present value terms). If current 24-year mortgage interest rates have dropped to 4.097% (APR), what is the lowest monthly payment you could make for the remaining life of your loan that would be attractive to the bank? a. What is the outstanding balance? The outstanding balance is $______________ (Round to the nearest cent.) b. Suppose you cannot make the mortgage payment and you are in danger of losing your house to foreclosure. The bank has offered to renegotiate your loan. The bank expects to get $161,182 for the house if it forecloses.…arrow_forwardyou are buying a house and will borrow $225,000 on a 30-year fixed reate mortgage with monthly payments to finance the purchase. your loan officer has offered you a mortgage with an APR of 4.3%. Alternatively, she tells you that you can “ buy down ” the interest rate to 4.05% if you pay points up front on the loan is 1 % ( one percentage point) of the loan value. you believe that you will live in the house for only eight years before selling the house and buying another house. this means that in eight years, you will pay off the remaining balance of the original mortgage. how many points, at most, would you be willing to pay to buy down the interest rate? Question) maximum points?arrow_forward
- You need a 30-year, fixed-rate mortgage to buy a new home for $265,000. Your mortgage bank will lend you the money at an APR of 5.6 percent for this 360-month loan. However, you can afford monthly payments of only $1,050, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. How large will this balloon payment have to be for you to keep your monthly payments at $1,050? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)arrow_forwardYou 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?arrow_forwardYou need a 25-year, fixed-rate mortgage to buy a new home for $200,000. Your mortgage bank will lend you the money at a 6.6 percent APR for this 300-month loan. However, you can afford monthly payments of only $900, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. Required: How large will this balloon payment have to be for you to keep your monthly payments at $900? A) 48,522.47 B) 341,563.19 C) 67,932.38 D) 366,212.08 E) 352,127.00 Only typing answer Please explain step by step without table and grapharrow_forward
- You want to buy a home but not take out a mortgage. You want to buy it outright when you are able to do so. You estimate that the home you will want to buy will cost $500,000. You have $20,000 today to set aside for it. The bank will pay you 2.8% annual interest. How long will it be before you can buy your home?arrow_forwardYou are buying a house and the mortgage company offers to let you pay a "point" (1.0% of the total amount of the loan) to reduce your APR from 6.50% to 6.25% on your $400,000, 30-year mortgage with monthly payments. If you plan to be in the house for at least 5 years, should you do it? (Note: Be careful not to round any intermediate steps less than six decimal places.) The monthly mortgage payment at 6.50% APR is $ 2528.27. (Round to the nearest cent.) The monthly mortgage payment at 6.25% APR is $ 2462.87. (Round to the nearest cent.) The lower interest rate on the mortgage results in monthly savings of $ 65.4. (Round to the nearest cent.) The PV of the monthly savings is $ (Round to the nearest cent.)arrow_forwardYou have just made an offer on a new home and are seeking a mortgage. You need to borrow $620,000. a. The bank offers a 30-year mortgage with fixed monthly payments and an interest rate of 0.53% per month. What is the amount of your monthly payment if you take this loan? b. Suppose you take the 30-year mortgage described in part (a). How much will you still owe on the mortgage after 10 years? a. The bank offers a 30-year mortgage with fixed monthly payments and an interest rate of 0.53% per month. What is the amount of your monthly payment if you take this loan? Your monthly payment will be $nothing. (Round to the nearest cent.) b. Suppose you take the 30-year mortgage described in part (a). How much will you still owe on the mortgage after 10 years? The remaining loan amount will be $nothing. arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Mortgages explained UK; Author: Finder - UK;https://www.youtube.com/watch?v=mdmIDvgRRLs;License: Standard Youtube License