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A home owner obtained a mortgage 5 years ago for OMR 105,000 at 13% amortized over 30 years (monthly payments). Mortgage rates have dropped, so that a 25- year loan can be obtained at 11% . There is no prepayment penalty on the mortgage balance of the original loan, but five points will be charged on the new loan other closing costs will be OMR 3,000.
a. Should the borrower refinance if he plans to be in the home for the remaining loan term? Assume the homeowner borrows only an amount equal to the outstanding balance of the loan .
b. Would your answer to part (a) change if he planned to be in the home for only five more years? why?
Twenty $1,000 municipal bonds are offered for sale at $18,000. The bond coupon rate is 6% per year payable semiannually. The bonds will mature and be redeemed at face value 5 years from now. If you purchase the bonds, the first premiums will be recei..
What effective annual interest rate does the firm earn when a customer does not take the discount? What effective annual interest rate does the firm earn if the terms are changed to 3.4/7, net 30, and the customer does not take the discount. What eff..
1. As a global manager, how would you rethink your concept of time and patience to assure you and your global partners are on the same page? 2. As a global manager, what other "forces" lead to the understanding of the differences in social culture?
DBP Inc. just paid a dividend of $4.00. The expected growth rate of dividend is 4 percent. The required return for investors in the first three years is 15 percent and 13 percent for the following three years. After those six years the required retur..
What are the pros and cons of applying the same hurdle rate for our investments across all global operations versus allowing individual country managers to incorporate sovereign spreads?
Call values are directly related to the underlying stock’s volatility, yet higher volatility means that the stock price can go much lower as well as higher. How would you resolve this apparent paradox? Explain why the value of a call option increases..
Following are the average yield-to-maturities for various A-rated corporate bonds issued by energy companies in the US. You want to estimate the yield-to-maturity on a 7 years-to-maturity bond. Given the yield-to-maturities below, compute the estimat..
Present two alternative formulations of the net cash flows adjusted for the depreciation tax shelter. - Calculate the net present value for project A, using straight-line depreciation for tax purposes.
Consider a three-period (four-date) binomial model that has the following characteristics: • Current price for underlying stock S = $40, Exercise price X = $40 • In each period, the stock price goes up by 6% or down by 2% from what it was in the prev..
What is the implied value of each warrant?
Turnberry Trucking Service would like to acquire 400 vans for its business. It can buy each van for $35,000, depreciate it completely over 7 years, and then sell it for $10,000. The tax rate of Turnberry is 35%, and its cost of debt is 12%. Prince’s ..
A corporate bond's price is quoted as 98.110. What is the price of the bond if its par value is $1,000?- A corporate bond's price is quoted as 102.312. If the bond's par value is $1,000, what is its market price?
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