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Corporate finance-debt instruments

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Reference no: EM133068771

Subject: Corporate Finance - Debt Instruments

You are valuing a Mortgage Note with a face value of $80,000,000 with a face rate of 8% annual COMPOUND, term 4 years with QUARTERLY payments. Answer:

(a) Present the development table differentiating the payment between amortization and interest payments.

(b) How much would you pay for the security if you demand a return of 5% real annual COMPOSED?

(c) What is the return on the transaction if you purchase the security for $79,000,000?

(d) Suppose you buy the security at a price of $80,000,000, what is the return on the transaction if you sell it at a price of $38,864,383 after receiving the fourth COUPON? Discuss your results.

Reference no: EM133068771

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