Reduce the size of the required mortgage

Assignment Help Financial Management
Reference no: EM131527006

At age 34.5, you deposited $50,000 into an SPDA yielding 9.5% pretax. Ten years later, to finance the purchase of a second home, you require a mortgage exceeding the cash-out value of your SPDA. As an alternative to liquidating your SPDA, you can borrow funds at an annual interest rate of 11%, tax deductible, for 15 years. Assume the interest and principal are all paid at the end of the loan period. Your current tax rate is 30%, and you expect it to remain at that level. How much better or worse off, after tax, will you be at age 59.5 if you invade your SPDA today (and incur the 10% excise tax) to reduce the size of the required mortgage?

Reference no: EM131527006

Questions Cloud

Identify a normal contango market : State the necessary conditions to identify a normal contango market.
Annual cash dividend policy that raises dividend each year : King Waterbeds has an annual cash dividend policy that raises the dividend each year by 5 ?%.
What is the real risk-free rate : If U.S. Treasury Bill has interest rate of 3.2% and inflation over Treasury Bill's maturity is expected to average 1.1%, then what is the real risk-free rate?
What is the efficiency market hypothesis : What is the Efficiency Market Hypothesis, its assumption and implications (discuss forms of market efficiency and provide at least one example of efficiency)
Reduce the size of the required mortgage : How much better or worse off, after tax, will you be at age 59.5 if you invade your SPDA today to reduce the size of the required mortgage?
Advantage of convertible bonds : Which of the following is an advantage of convertible bonds?
The risk-free rate remained unchanged : if the return on an average stock increased by 30 percent while the risk-free rate remained unchanged?
What are the arithmetic and geometric returns for the stock : What are the arithmetic and geometric returns for the stock?
Cash flow analysis is setting the bid price on a project : Another utilization of cash flow analysis is setting the bid price on a project. what bid price per carton should you submit?

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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