Financing alternative to obtaining first mortgage

Assignment Help Financial Management
Reference no: EM131497228

Bud is offering a house for sale for $180,000 with an assumable loan which was made 5 years ago for $140,000 at 8.75% over 30 years. Kelsey is interested in buying the property and can make $20,000 down payment. A second mortgage can be obtained for the balance at 12.5% for 25 years. What is the effective cost of the combined loans, if Kelsey would like to compare this financing alternative to obtaining a first mortgage for the full amount?

9.04%

9.39%

10.63%

11.27%

please show steps on how to calculate.

Reference no: EM131497228

Questions Cloud

Beta of the equity after firm changed its capital structure : What should be the beta of the equity after the firm changed its capital structure?
What effect could this have on a firms strategies : List three ways that financial ratios should be compared or used. Which of the three comparisons do you feel is most important? Why?
Develop a corporate ife matrix for volkswagen group : Purpose: Volkswagen (VW) Group is featured in the opening chapter case as a firm that engages in excellent strategic planning despite its recent legal/ethical.
Marketing strategy around the use of social media : Develop a marketing strategy around the use of social media for the company Andiamo cafe
Financing alternative to obtaining first mortgage : If Kelsey would like to compare this financing alternative to obtaining a first mortgage for the full amount?
Should volkswagen deploy more resources outside of europe : Purpose: As indicated in the opening chapter boxed insert, Volkswagen (VW) receives more revenue from outside its home base of Europe than from inside Europe.
Aluminum tank for which it will be the preferred option : determine the highest cost for the aluminum tank for which it will be the preferred option. Express your answer in $ to the nearest $1,000.
How much annual profit will the firm make : Purpose: Breakeven analysis is one of the simplest yet underused analytical tools in management. It helps provide a dynamic view of the relationships among.
Adjustable rate mortgage loan : A borrower takes out a 30-year adjustable rate mortgage loan for $200,000 with monthly payments. What would the Year 3 monthly payment be?

Reviews

Write a Review

Financial Management Questions & Answers

  What is the geometric average return for period

Your portfolio has provided you with returns of 8.6 percent, 14.2 percent, -3.7 percent, and 12.0 percent over the past four years, respectively. What is the geometric average return for this period?

  Arithmetic returns are normally distributed

Arithmetic returns are normally distributed with mean 0.1 and standard deviation 0.25. Portfolio is currently worth $100.

  An interest-earning account

You currently have $67,000 in an interest-earning account. From this account, you wish to make 20 year-end payments of $5,000 each. What annual rate of return must you make on this account to meet your objective?

  Junior interiors market value capital structure

Junior Interiors market value capital structure of 62% Common Equity, 3% Preferred Stock (PS) and 35% Debt. The company does not pay dividends, and evaluates its operations as approximately 30% more risky than an “average” company in the industry. Wh..

  The market for zithers is growing quickly

You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. PUTZ has a 40 percent tax rate, and the required return on the project is 12 percent. Assume th..

  Firms balance sheet under current liabilities

Other things held constant, which of the following actions would increase the amount of cash on a company’s balance sheet? Which of the following items can be found on a firm’s balance sheet under current liabilities?

  Growth rate drop-what is the market value in one year

Warner is expected to have its growth rate drop from 15% to 5% in 5 years. The last dividend was $2 and the discount rate is based on beta of 2, T bond rate of 6% and return of the market of 11%. First, find the value of Warner. Second, compute the y..

  The prerequisites of an ideally insurable risk

It may be correctly claimed that insurers usually do not pay for losses because: smoking cigarettes is an example of; the norris and manhart cases resulted in which of the following outcomes? from the viewpoint of an insurer, the prerequisites of an ..

  Municipal bonds with par value

Tarea purchased 55 municipal bonds with a par value of $100 each and a coupon rate of 5.5% with a maturation date of 2023. The municipal bond coupons payout semi annually, what interest payment should Tarea expects to receive every 6 months for the n..

  How much are you willing to pay for this common stock

You will buy a common stock that will pay $0.50 dividend next year and the dividend will grow at an annual rate of 5%. The dividend payments are expected to go on indefinitely. If your required rate on this common stock is 10%, how much are you willi..

  Determine project NPV Should HFX accept or reject project

HFX Ltd. has the opportunity to undertake the following project: The project requires an immediate $1,000,000 investment in equipment that will be added to an ongoing asset pool with a 20% CCA rate. The project will have a total life of 10 years. Det..

  Required return exceed required return

Bradford Manufacturing Company has a beta of 1.45, while Farley Industries has a beta of 0.85. The required return on an index fund that holds the entire stock market is 12.0%. The risk free rate of interest is 5%. By how much does Bradford's require..

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