Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)
3rd Edition
ISBN: 9780133507676
Author: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Publisher: PEARSON
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Chapter 4, Problem 5P
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?
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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
Chapter 4 Solutions
Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)
Ch. 4 - Prob. 1CCCh. 4 - Prob. 2CCCh. 4 - Prob. 3CCCh. 4 - Prob. 4CCCh. 4 - Prob. 5CCCh. 4 - Prob. 6CCCh. 4 - Howcanan infinitely...Ch. 4 - Prob. 8CCCh. 4 - Prob. 9CCCh. 4 - Prob. 10CC
Ch. 4 - Prob. 11CCCh. 4 - Whencashflowsoccur at anon-annual interval, what...Ch. 4 - What is the intuition behind the fact that the...Ch. 4 - What must be true about a cash flow stream in...Ch. 4 - Prob. 3CTCh. 4 - Prob. 4CTCh. 4 - Prob. 5CTCh. 4 - Prob. 6CTCh. 4 - What must be true about the growth rate in order...Ch. 4 - In what types of situations would it be useful to...Ch. 4 - Prob. 1DCCh. 4 - Prob. 2DCCh. 4 - Prob. 3DCCh. 4 - Calculate the present value of the salary...Ch. 4 - Prob. 5DCCh. 4 - Prob. 1PCh. 4 - What is the present value of the following set of...Ch. 4 - You want to borrow $10,000. You figure that you...Ch. 4 - Prob. 4PCh. 4 - You have just taken out a five-year loan from a...Ch. 4 - Prob. 6PCh. 4 - Prob. 7PCh. 4 - Prob. 8PCh. 4 - Prob. 9PCh. 4 - Prob. 10PCh. 4 - 11. Assume you can earn 9% per year on your...Ch. 4 - Prob. 12PCh. 4 - Prob. 13PCh. 4 - 14. The British government has a consol bond...Ch. 4 - Prob. 15PCh. 4 - 19. Your grandmother has been putting $1000 into a...Ch. 4 - 20. Assume that your parents wanted to have...Ch. 4 - Prob. 18PCh. 4 - Prob. 19PCh. 4 - 23. Assume that Social Security promises you...Ch. 4 - 24. When Alex Rodriguez moved to the Texas...Ch. 4 - Prob. 22PCh. 4 - A rich relative has bequeathed you a growing...Ch. 4 - Prob. 24PCh. 4 - Prob. 25PCh. 4 - Prob. 26PCh. 4 - 30. A rich aunt has promised you $5000 one year...Ch. 4 - Prob. 28PCh. 4 - Prob. 29PCh. 4 - Prob. 30PCh. 4 - 34. You have decided to buy a perpetual bond. The...Ch. 4 - Prob. 32PCh. 4 - 36. You are thinking about buying a piece oi art...Ch. 4 - 35. You are thinking of purchasing a house. The...Ch. 4 - Prob. 35PCh. 4 - Prob. 36PCh. 4 - 40. A local bank is running the following...Ch. 4 - Prob. 38PCh. 4 - Prob. 39PCh. 4 - 43. Suppose you currently have $5000 in your...Ch. 4 - 44. Your firm spends $5000 every month on printing...Ch. 4 - 45. You are looking to buy a car and can afford to...Ch. 4 - Prob. 43P
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- A friend asks to borrow $45 from you and in return will pay you $48 in one year. If your bank is offering a 5.7% interest rate on deposits and loans: a. How much would you have in one year if you deposited the $45 instead? b. How much money could you borrow today if you pay the bank $48 in one year? c. Should you loan the money to your friend or deposit it in the bank? a. How much would you have in one year if you deposited the $45 instead? If you deposit the money in the bank today you will have in one year. (Round to the nearest cent.) b. How much money could you borrow today if you pay the bank $48 in one year? You will be able to borrow $ today. (Round to the nearest cent.) c. Should you loan the money to your friend or deposit it in the bank? (Select from the drop-down menu.) From a financial perspective, you should as it will result in more money for you at the end of the year.arrow_forwardA friend asks to borrow $55 from you and in return will pay you $58 in one year. If your bank is offering a 5.5% interest rate on deposits and loans: How much would you have in one year if you deposited the $55 instead? How much money could you borrow today if you pay the bank $58 in one year? Should you loan the money to your friend or deposit it in the bank?arrow_forwardA friend asks to borrow $53 from you and in return will pay you $56 in one year. If your bank is offering a 6.5% interest rate on deposits and loans: a. How much would you have in one year if you deposited the $53 instead? b. How much money could you borrow today if you pay the bank $56 in one year? c. Should you loan the money to your friend or deposit it in the bank?arrow_forward
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