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Five years ago you signed a loan contract with a re-payment schedule of 12-year fixed-rate, at 5.5 percent interest. You have made all your monthly payments during the past 5 years and now have an outstanding balance of $125,000. The current market rates are at 4.25 percent but you are obliged to continue paying your mortgage based on initial rate of 5.5 percent.
1. Calculate your monthly payments for the next 7 years (the remaining time of the contract)
2. Suppose your lending officer approaches you with a new proposal: if you pay a $6,000 lump-sum pre-payment penalty you are allowed to switch to a new contract with the current 4.25% percent rate for the remaining part of the loan. Will you accept this proposal? Why?
3. What is the maximum prepayment fee that you would pay to accept the deal?
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A call option on IBM has an exercise price of 100, the share price S is 120. The option will expire in 6 months, and the riskfree rate is 10Yo p.a. and the historical variance of the returns of IBM is I2Yo p.a. Before the option expires, IBM is expec..
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The focus is to demonstrate understanding of integrated marketting communications and how to achieve brand equity.
To complete your last year in business school and then go through law school, you will need $20,000 per year for 4 years, starting next year (that is, you will need to withdraw the first $20,000 one year from today). How large must the deposit be? Ho..
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