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A property is purchased for $70,000. The purchase is financed with a GPM carrying a 12 percent interest rate. A 7.5 percent rate of graduation will be applied to monthly payments beginning each year after the loan is originated for a period of five years. The initial loan amount is $63,000 for a term of 30 years. The homeowner expects to sell the property after seven years.
a. If the initial monthly payment is $498.57, what will payments be at the beginning of years 2, 3, 4, and 5?
b. What would the payment be if a CPM loan was available?
c. Assume the loan is originated with two discount points. What is the effective yield on the GPM?
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Consider the following table for a seven-year period: Returns Year U.S. Treasury Bills Inflation Year 1 3.60 % −1.18 % Year 2 3.45 −2.32 Year 3 4.35 −1.22 Year 4 4.77 0.64 Year 5 2.57 −6.46 Year 6 1.45 −9.38 Year 7 1.18 −10.33 Required: What was the ..
Suppose you borrow $200500 when financing a coffee shop which is valued at $275000. You expect to generate a cash flow of $550000 at the end of the year. The cost of debt is 8%. What is the cost of equity? What should the value of the equity be?
It is January 1. Your firm expects to issue (borrow) three- month Eurodollar time deposits at the beginning of February, May, August, and November in the next year. Explain what position(s) you would take today with FRAs based on three-month LIBOR if..
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