Which loan should she sign up for
Course:- Financial Management
Reference No.:- EM13942915

Assignment Help
Assignment Help >> Financial Management

Susan wants to buy a house for $200,000. US Bank will give her the loan at 3.5% for 30 years if she puts 20% down and Dacotah Bank will give her the loan at 3.8% for 30 years if she puts 10% down. There are NO other options.

a) Which loan should she sign up for? Pick one, no explanation needed. What is her monthly payment?

b) After 5 years, Susan is approached by a philanthropic group known as C.S.C. They offer to lend her $50,000 interest free for an indefinite period of time, provided she joins their group. Susan takes up the offer and uses the money to pay off some of her mortgage. What will be her new NPER (how many years will it take for her to pay off her remaining mortgage)?

c) After another 7 years, a private bank offers to take over the remaining mortgage at 3%. What will be her first month interest payment if she signs up with them? (To do this, find the remaining mortgage after 12 years. Use this mortgage amount as the new principle. First month interest payment will be the monthly rate multiplied by principle).

d) Assume, there is a $1,000 one-time processing fee for signing up with the private bank in the previous part (c). Does it make sense to move the mortgage over to the private bank 3%? Explain.

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
You have $102,000 to invest in a portfolio containing Stock X, Stock Y, and a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has a
Suppose that you generate a cash based income statement and determine that CFO equals 75 percent of cash dividends paid and payments on current maturities of long term debt. W
Over the past five years, Westover Enterprises has paid increasing annual dividends of $.82, $.87, $.95, $1.10, and $1.12 a share. What is the average dividend growth rate?
He takes home the car today. No payments are required until the end of the fifth month, when he pays $680. Payments of $680 are then due every month until (and including) the
You are evaluating two different silicon wafer milling machines. The Techron I costs $219,000, has a three-year life, and has pretax operating costs of $56,000 per year. use s
Everything else constant, the maximum expected loss ratio that would yield a profitable line after including investment income is $7,500. Everything else constant, the maximum
Stock in CDB Industries has a beta of .95. The market risk premium is 7 percent, and T-bills are currently yielding 4 percent. CDB’s most recent dividend was $2.40 per share,
Filer Manufacturing has 8.4 million shares of common stock outstanding. The current share price is $54, and the book value per share is $5. Filer manufacturing also has two bo