Calculate the amount of johns payment

Assignment Help Corporate Finance
Reference no: EM13202472

Consider the following scenario: John buys a house for $135,000 and takes out a five year adjustable rate mortgage with a beginning rate of 5%. He makes annual payments rather than monthly payments.

Unfortunately for John, interest rates go up by 1% for each of the five years of his loan (Year 1 is 5%, Year 2 is 6%, Year 3 is 7%, Year 4 is 8%, Year 5 is 9%).

Calculate the amount of John's payment over the life of his loan. Compare these findings if he would have taken out a fix rate loan for the same period at 6.5%. Which do you think is the better deal?

Submit your Distinguished Scholar Project to the Dropbox by the end of the Unit.

Reference no: EM13202472

Questions Cloud

Explain why some countries experienced growth : Read "A Possible Perspective on Growth and Stagnation Over the Past 200 Years" posted on Blackboard. a. Describe the 4 reasons that Acemoglu gives for why the world did not experience growth before 1800. Name the 3 structural transformations underwen..
Calculate the effective interest to compound quarterly : What sum should you deposit into an account to yield 20 year end payments, starting with $10,000 at the end of the first year and increasing by 4% each year at an interest rate of 8% compounded quarterly.
Calculate the amount of the monthly deposit sarah must make : Sarah will use the rest of the proceeds of her retirement savings fund to set up a fund from which she plans to bequeath $500,000 to her grand- children on her 80th birthday. Her bequest fund will pay interest of 41 2 percent compounded annually.
Calculate the size of the endowment : junstin.Ting Corporation wants to establish a scholarship in the company's name at a university. The firm wants the scholarship to provide a quarterly award of $4500. The university's scholarship foundation will invest the endowment in a fund that..
Calculate the amount of johns payment : Calculate the amount of John's payment over the life of his loan and compare these findings if he would have taken out a fix rate loan for the same period at 6.5%. Which do you think is the better deal?
Find the value today of the maintenance costs : The operations manager of Black Cat Blades Ltd. of Edmonton, Alberta, is examining the cost of maintaining the company's manufacturing facility. Maintenance occurs every month. The cost of maintenance starts at $2250 and it will grow by $20 each t..
Determine the amounts of the first payment : Lawson just purchased an income annuity for $323,335. The income annuity pays interest at a rate of 3.85 percent compounded monthly. The first income payment will be made today and the final income payment will be made in twenty years.
Determine the amount you will need in an income fund : if you were to retire today, you would need a monthly income of $1600 in addition to the company pension, Canada Pension Plan, and Old Age Security payments you expect to receive. Today is your 22nd birthday and you plan to retire on your 65th bir..
Find the number of deposits thomas must make : Thomas has found a savings fund that pays interest of 2.62 percent compounded semiannually. He will make monthly deposits of $395 and he can make a deposit only once a month on the agreed payment date. Find the number of deposits Thomas must make.

Reviews

Write a Review

Corporate Finance Questions & Answers

  Find lowest acceptable transfer price

The commando motorcycle corporation has decided to become decentralized and split its operations into 2 divisions. Motor and Assembly. Both divisions will be treated as investment centers.

  General fraudulent practices

Answer following question you must also describe whether your answer affects companies and individuals positively or negatively.

  Analyzing the price changes on buying

Consider two investors; investor A and investor B with the following demand curve for a stock: At a price of $50, how much will A and B purchase?

  Benefits of portfolio diversification

Explain what the CAPM is all about in terms of expected return on an individual stock and how a firm seeking to raise money by issuing new common stock would be concerned with the Beta of its common stock.

  Equilibrium due to government intervention

Explain a condition where values have been held out of equilibrium due to government intervention in the market the obvious ones discussed in the text are rent control and agricultural subsidies.

  Calculating the expected impact and the standard deviation

Quantitatively evaluating the following information by computing expected impact, standard deviation, & the coefficient of variation for each risk.

  What interest rate for the first year must bank

Suppose bank B wants to match the offer of bank A. Interest rates for years 2 to 10 are as above. What interest rate for the first year must bank B offer you so that you get the same amount as from bank A?

  Examination of differences among revenue, costs & cash flows

Match the following finance terms with the solutions below. If none fit, indicate it.

  Find the investing amount

An individual who is 22 years old wins an amount of 5000$. He invests the money at 8% compounded quarterly for 43 years until he stop working. When he retires he invests the money at 7 percent compounded monthly.

  Process improvement plan

You sat in CEO chair and studies real world hospital accounts receivable problem with your team, & came up with a process improvement plan to reduce days in accounts receivable & improve cash flow to your hospital.

  Calculate cost of the preferred shares

Calculate the cost of the preferred shares. What is the after-tax cost of the preferred shares and if the firm sells the preferred stock with a 10 percent annual dividend and nets $90 after flotation costs, what is its cost?

  Explain the tax cost recovery methods

The Internal Revenue Code authorizes decrease for sell or business activities if the espenses is "ordinary and necessary" and also explain the tax cost recovery methods include amortization, depreciation, and depletion.

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