Market interest rate from the builder

Assignment Help Financial Management

Reference no: EM13732320

Suppose Peter can get a loan with a below-market interest rate from the builder. This fully amortizing FRM loan will have a 80% LTV, 4% interest rate, 30 years amortization period, and with no loan fees. At what price should the builder sell the asset to Peter in order to earn the market rate of interest (4.5%) on the loan? Assume that Peter would have the loan for the entire term of 30 years and the asset would normally sell for $300,000 without any special financing.

Reference no: EM13732320

Questions Cloud

Aid of aggregate output market and money market : Suppose an economy that is initially at full employment faces a substantial increase in the factor cost of production. Discuss (with the aid of aggregate output market and money market diagrams) the short-run effect on output, unemployment, general p..

Actuarially fair amount for insurance : Suppose utility had been leaner in wealth would this person willing to pay anything more than the actuarially fair amount for insurance.

Elasticity of demand for labor with respect to the wage rate : The elasticity of demand for labor with respect to the wage rate will be less if firms using this labor are experiencing decreasing returns to scale than if they are experiencing increasing return to scale True false why

Consider a one-step binomial model for a stock : Consider a one-step binomial model for a stock. Now, the stock is worth S0, but will be worth either S0u or S0d at time T where d

Market interest rate from the builder : Suppose Peter can get a loan with a below-market interest rate from the builder. This fully amortizing FRM loan will have a 80% LTV, 4% interest rate, 30 years amortization period, and with no loan fees.

Calculate the amount of the firms after tax cash flow : Moby Dick Corporation has sales of $4,635,480 income tax of $400,651; the selling general and administrative expenses of $294,228; depreciation of $395,852; cost of goods of $2,543,550; and interest expense of $188,723. Calculate the amount of the fi..

What is the cost of issuing new common stock : The common stock dividend has grown at a steady rate from $0.58 in December 1990 to $1.2 in December 2000. The same growth rate is expected to continue for long time in the future. The floatation cost for new common stocks is 10%. What is the cost of..

What is the intrinsic value of this option : Suppose a European call option has an exercise price of $100 and the underlying stock has a price of $100. The stock will pay no dividends over the next year. The option expires in 1 year and the continuously compounded interest rate is 6%. (a) What ..

what position in IBM puts-calls and underlying stock : Construct profit diagrams or profit tables on expiration to show what position in IBM puts, calls and/or underlying stock best expresses the investor’s objectives described below. Assume IBM currently sells for $150 so that profit tables for stock pr..

User Account

All Pages