What interest rate expressed as an annual rate

Assignment Help Finance Basics

Reference no: EM13260631

Your father has asked your advice on the following problem. He has a mortgage loan on the family home that was made several years ago when interest rates were lower. The loan has a current balance of $40,000 and will be paid off in twenty years by paying $330 per month. He discussed paying off the loan ahead of schedule with an officer of the bank holding the mortgage. The bank is willing to accept $36,000 right now to pay off the loan completely. What interest rate, expressed as an annual rate, would your father earn by paying off the loan now rather than making the monthly payments for twenty years? If your father is currently earning 9 percent on his investments, should he pay off the loan?

Reference no: EM13260631

Questions Cloud

What is the present value of the second option : You can have $8,500 per month for the next three years, or you can have $7,200 per month for the next three years, along with a $38,500 signing bonus today. Assume the interest rate is 8 percent compounded monthly.

How much work has been done on the girl by the force : A young girl with mass 35.5kg is sliding on a horizontal, frictionless surface with an initial momentum that is due east and that has magnitude 86.0kg?m/s, How much work has been done on the girl by the force in the time interval from t= 0s to the ..

How much must you invest today : Suppose you are committed to owning a $190,000 Ferrari. If you believe your mutual fund can achieve a 12 percent annual rate of return and you want to buy the car in 9 years on the day you turn 30, how much must you invest today?

Basic arithmetic operation and trigonometric functions : Design a Java software system that simulates a calculator that performs at least the basic arithmetic operation and trigonometric functions.

What interest rate expressed as an annual rate : What interest rate, expressed as an annual rate, would your father earn by paying off the loan now rather than making the monthly payments for twenty years? If your father is currently earning 9 percent on his investments, should he pay off the lo..

Determine the equivalent resistance of the network : For the following circuit: V1 = 300 V, R1 = R4 = 10 ?, R2 = R3 = 20 ? and R5 = 40 ?. Find the equivalent resistance of the network

What are symbolic meanings of food known to the culture : Describe uses of food and wine within the main religion of the group and what are symbolic meanings of food known to the culture?

Quest for personal expression. : What links the work of the work of many of the artists of the late 19th century is a quest for personal expression. In which artists' work can you see this?

What is the current price of bond m and bond n : it makes no coupon payments over the life of the bond. The required return on both these bonds is 10 percent compounded semiannually.

User Account

All Pages