Refinancing for tom assuming he stays until maturity

Assignment Help Financial Management
Reference no: EM131867855

Tom got a 30 year fully amortizing FRM for $500,000 at 8%, with constant monthly payments. After 3 years of payments rates fall and he can get a 27 year FRM at 5%, but he must pay 2 points and $1000 in closing costs to get the new loan. Think of the refinancing decision as an investment for Tom, he pays a fee now but saves money in the future in the form of lower payments. What is the annualized IRR of refinancing for Tom assuming he stays until maturity?

Reference no: EM131867855

Questions Cloud

Determine the minimum required accounting average return : How do we determine the minimum required accounting average return (AAR)?
What will be the amount of each annual withdrawal : Assume that you won a hundred $1,000 par value bonds, with a total face value of $100,000. What will be the amount of each annual withdrawal?
What is trenthams total asset turnover ratio : If accounts recievable comprises half of the firms current assets and trentham has $6,000,000 in net fixed assets, what is trenthams total asset turnover ratio?
Minimum-variance portfolio of the two risky funds : A pension fund manager is considering three mutual funds. What is expected return and standard deviation for minimum-variance portfolio of the two risky funds?
Refinancing for tom assuming he stays until maturity : What is the annualized IRR of refinancing for Tom assuming he stays until maturity?
Find the future value of investing : Find the future value of investing $100,000 today at 5% compounded annually and compounded quarterly for 30 years.
Growth rates produces reasonable terminal value : How do you derermine if a set of growth rates produces a reasonable terminal value?
Stockbridge industries has total asset turnover ratio : Stockbridge Industries has a total asset turnover ratio of 3.6 times and net annual sales of 43.2 million. what is the firms total debt ratio?
Bonds for some much-needed expansion projects : Seether Co. wants to issue new 12-year bonds for some much-needed expansion projects.

Reviews

Write a Review

Financial Management Questions & Answers

  Stock market indices are used for all of the expert

Stock market indices are used for all of the following except: a) to serve as a benchmark for judging performance of asset managers b) to help analyze stock market returns on a global basis c) to help perform technical analysis of the overall market ..

  Decrease the length of the cash cycle

which of the following would decrease the length of the cash cycle?

  Discuss the advantage of using a personal budget

Discuss the advantage of using a personal budget. what did you learn about your spending habit from putting a budget together?

  Show the calculation for given problem

Its annual sales are $5.13 million, its average tax rate is 30%, and its net profit margin on sales is 5%. What is its TIE ratio?- show the calculation for this problem?

  Present value factor is also known as the discount factor

The effective annual rate will increase as the number of compounding periods per year increases. The time value of money means that a dollar today is worth less than a dollar at any time in the future. Present value factors for amounts are reciprocal..

  Real assets and financial assets

In Keynes's liquidity preference framework, individuals are assumed to hold their wealth in two forms: (a) real assets and financial assets.

  Considering buying stock

You are considering buying stock in Biqing, Inc., a West Texas company that provides PPO medical services. The dividend just paid (i.e., D0) was $1.00 and is expected to increase by 20% per year for two years. If you require a 15% rate of return, wha..

  Investment portfolio that consists of three types of bonds

A pension company has an investment portfolio that consists of three types of bonds. Twenty-year bond with annual coupon of 4%

  The term ex-dividend means

The term ex-dividend means. The book value of equity is the value of the company as perceived by investors.

  The loan and no interest was accrued to the loan

Bob contributed $7,000 of cash to BF Inc., a newly created S corporation for federal income tax purposes, and made a loan of $2,000 to BF Inc. During Year 1, BF Inc. generated ordinary income of $8,200 and tax exempt income of $2,000. No repayment wa..

  What would be the percentage change in price of these bonds

Both Bond Bill and Bond Ted have 10.8 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 7 years to maturity, whereas Bond Ted has 24 years to maturity. if interest rates suddenly rise by 3%, what is the percentage ..

  Considering undertaking a land improvement practice

You are considering undertaking a land improvement practice that will cost you $120 per acre to establish and an additional $8 per acre to maintain over the next 10 years. Assuming a real discount rate of 4%, what is the present value of the total co..

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