Amortize initial fee and pay back the loan annually

Assignment Help Financial Management
Reference no: EM131308041

In discussing the terms of a mortgage loan, I (the borrower) am offered to choose between a 5-year loan to be repaid at an interest rate of 6% with no initial fee (Proposal A), or reduce the interest rate to 5% with an initial fee of 4 points on the value of the loan (Proposal B). Then, if you can "amortize" the initial fee and pay back the loan annually

Reference no: EM131308041

Questions Cloud

The bond investment decisions of dave and marlene carter : Dave and Marlene Carter live in the Boston area, where Dave has a successful orthodontics practice. Dave and Marlene have built up a sizable investment portfolio and have always had a major portion of their investments in fixed-income securities. Wha..
What initial margin deposit would the investor have to make : Suppose an investor took a 3-month long position on one crude oil futures contract (each futures contract for crude oil is written for 1, 000 barrels). The futures price per barrel was $45. If the margin requirement were 5% of the value of the contra..
Assume investors require return of nine percent on stock : Gilmore, Inc., just paid a dividend of $2.70 per share on its stock. The dividends are expected to grow at a constant rate of 4.5 percent per year, indefinitely. Assume investors require a return of 9 percent on this stock. What is the current price?..
How many years is it until this bond matures : Bond X has face value of $1,000, semi-annual coupon of $40, years to maturity of 10, and price of $1,179.65. Bond Y is identical to Bond X except with a semi-annual coupon of $50. What is the price for Bond Y? The Lo Sun Corporation offers a 5.9 perc..
Amortize initial fee and pay back the loan annually : In discussing the terms of a mortgage loan, I (the borrower) am offered to choose between a 5-year loan to be repaid at an interest rate of 6% with no initial fee (Proposal A), or reduce the interest rate to 5% with an initial fee of 4 points on the ..
Calculating loan payments : You want to buy a new sports coupe for $75,700, and the finance office at the dealership has quoted you a loan with an APR of 8.1 percent for 36 months to buy the car. What will your monthly payments be? What is the effective annual rate on this loan..
What is the percentage change in the bonds price : A(n) ten-year bond has a yield of 11% and a duration of 7.205 years. If the bond's yield changes by 75 basis points, what is the percentage change in the bond's price?
What will be the amount of your monthly payment : Having graduated from UCF with a degree in finance, you can now afford to buy a $120,000 house. Suppose you pay 20% as a down payment and finance the rest for 30 years at 8%. Assuming house payments occur at the end of each month, what will be the am..
Simple interest versus compound interest : First City Bank pays 6 percent simple interest on its savings account balances, whereas Second City Bank pays 6 percent interest compounded annually. If you made a deposit of $9,000 in each bank, how much more money would you earn from your Second Ci..

Reviews

Write a Review

Financial Management Questions & Answers

  Considering the purchase of new manufacturing facility

Sanders Enterprises, Inc., has been considering the purchase of a new manufacturing facility for $288,000. The facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value after the seven years..

  Reported on the income statement using the equity method

A Company buys voting common stock in B Company as an investment. Briefly explain /discuss how A's income from its investment in B would be reported on the income statement using the equity method

  Project is expected to create operating cash flows

A project is expected to create operating cash flows of $35,000 a year for four years. The initial cost of the fixed assets is $100,000. These assets will be worthless at the end of the project. An initial $5,000 of net working capital will be requir..

  Calculate the relevant returns and explain answer

Financial investors in all countries have the expectation that the spot exchange rate in 90 days will be 0.7100 euro/U.S. dollar. -Are investors expecting the euro will appreciate or depreciate during the next 90 days?

  The effect of this sale on ni and cash would be

At the end of 2012, Liam Corporation buys a new machine for $30K, the cost of which is depreciated over 5 years. The first year’s depreciation is taken in 2013. Liam sells the machine at the end of 2015 (after three years) for $13,000. Liam’s tax rat..

  Weighted average cost of capital-value of the firm

Slippery Slope Roof's net cash flows are as follows: After year 3, net cash flows grew at a constant rate of 3%. The weighted average cost of capital is 9%. What is the value of the firm?

  Discuss criteria for a good international monetary system

Discuss the criteria for a "good" international monetary system. In your discussion, be sure to support your answer by explaining why the stated criteria are necessary.

  What is the investment in accounts receivable

Zucha Corporation has an inventory period of 55 days, an accounts receivable (A/R) period of 6 days, and an accounts payable (A/P) period of 3 days. The company’s annual sales is $182,795. If the company’s annual sales are on credit, what is the inve..

  Coupon rate and pays interest annually

Morning Star Inc. sold an issue of 30-year, $1,000 par value bonds to the public. The bonds has a 14.6% coupon rate and pays interest annually. It is now 7 years later. The current market rate of interest of the Morning Star INc. bonds is 11.7%. What..

  What annual return you will need to earn to meet this goal

You plan on retiring in 20 years. You currently have $275,000 and think you will need $1,000,000 to retire. Assuming you don’t deposit any additional money into the account, what annual return you will need to earn to meet this goal.

  About the loan amortization

Assume that your aunt sold her house on December 31, and to help close the sale she took a second mortgage in the amount of $15,000 as part of the payment. The mortgage has a quoted (or nominal) interest rate of 6%, but it calls for payments every 6 ..

  Compute the price of a bond

The Florida Investment Fund buys 98 bonds of the Gator Corporation through a broker. The bonds pay 12 percent annual interest. The yield to maturity (market rate of interest) is 14 percent. The bonds have a 20-year maturity. Compute the total value o..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd