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(Round your calculation results to 2 decimal places, whenever necessary)
You are currently in the 9th year of a 30-year fixed rate, fully amortized mortgage with monthly payments, with the lock-in period of 10 years (prepayment penalty is 2% of the remaining balance). Assume that rate doesn’t change over the life of the loan. You originally borrowed $180,000 with a 9.50% annual interest rate. Interest rates are expected to be lower, so you are considering the feasibility of refinancing the loan. To refinance, closing costs are expected to be 3.85% of the new loan amount. Assume no prepayment penalty with new loans.
A) Using a spreadsheet, calculate the new loan payments for every eighth of a percent from a revised interest rate of 7% to 9%. Assume you will refinance at the end of the 9th year of the mortgage with prepayment penalty and closing costs included in the new loan and you do not wish to extend the length of the mortgage beyond its current length (i.e. the maturity of the new loan is 21 years from now).
B) How low must interest rates go in order for you to breakeven?
C) Using the spreadsheet graphics, plot the new interest rates versus the new mortgage payments and show the breakeven point.
Calvani, Inc., has a cash cycle of 39.5 days, an operating cycle of 55 days, and an inventory period of 23 days. The company reported cost of goods sold in the amount of $355,000, and credit sales were $578,000. What is the company’s average balance ..
A bond that matures in 5 years is currently trading at $950. The yield to maturity on the bond is 6.5% and the bond makes coupon payments annually. Face value is $1000. What is the bond's coupon rate?
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A stock portfolio P is comprised of three stocks A,B,C. The expected returns for the securities are .05 for stock A, .08 for Stock B and .18 for Stock C. The variance of returns for Stock A is .01, .16 for Stock B and .25 for Stock C. Prepare an expe..
On each no delinquent sale Cast Iron receives revenues with a present value of $1,360 and incurs costs with a present value of $1,210. Assume there is no possibility of repeat orders and that the probability of successful collection from the customer..
Suppose that the annual interest rate is 2.0 percent in the United States and 4 percent in Germany, and that the spot exchange rate is $1.60/€ and the forward exchange rate, with one-year maturity, is $1.58/€. Assume that an arbitrager can borrow up ..
Stellar Plastics is analyzing a proposed project. The company expects to sell 12,000 units, give or take 4 percent. The expected variable cost per unit is $6.00 and the expected fixed cost is $36,000. The fixed and variable cost estimates are conside..
A firm has a debt-to-equity ratio of 0.55. What is the total debt ratio?
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