Determine outstanding balance of the loan at end of year

Assignment Help Financial Management
Reference no: EM131495279

A client is evaluating the terms for a 30-year loan for $300,000 that would enable him to purchase a new home. The bank is quoting a 4.8 percent interest rate on the mortgage and has agreed to set monthly mortgage payment at $1000.00 for the first five years of the loan term. At the end of the fifth year (after 60 monthly payments of $1000.00), the monthly loan payment will be reset so that the new monthly payment will pay off the outstanding loan balance over the remaining 25-year loan term. Assuming the interest rate on the loan is fixed for the entire 30-year loan term, determine:

a. the required monthly payment during the final 25 years of the loan term

b. the outstanding balance of the loan at the end of year five, when the monthly payment on the loan is reset

Reference no: EM131495279

Questions Cloud

Primary trade-off that results from factoring receivables : What is primary trade-off that results from factoring receivables, from the perspective of the organization that sells the A/R (accounts receivable) to the fact
Evaluating a project for the tiff-any golf club : You are evaluating a project for The Tiff-any golf club, guaranteed to correct that nasty slice.
The opportunity to invest in a machine : You have the opportunity to invest in a machine that costs $340,000. What if the relevant discount rate is 9 percent?
What will the price be in three years and in fifteen years : The dividends are expected to grow at a constant rate of 5 percent per year, What will the price be in three years and in fifteen years?
Determine outstanding balance of the loan at end of year : determine the outstanding balance of the loan at the end of year five, when the monthly payment on the loan is reset.
The annualized yield to maturity for a zero-coupon : The annualized yield to maturity for a zero-coupon U.S. Treasury strip having one year to maturity is currently 1.5 percent.
About the share price : Burkhardt Corp. pays a constant $14.50 dividend on its stock. If the required return on this stock is 10 percent, what is the current share price?
What growth rate is expected for company stock price : If the company plans to pay a dividend of $3.50 next year, what growth rate is expected for the company’s stock price?
Net income and the change in cash and equivalents : PepsiCo for the year 2015 explain the difference between net income and the change in cash and equivalents.

Reviews

Write a Review

Financial Management Questions & Answers

  Inventories are stated at lower of cost or market

You notice in the notes to the financial statements that “Inventories are stated at lower of cost or market. Cost is determined on the first-in, first-out basis.” How would the financial statements differ if the company used LIFO instead of FIFO? How..

  What must the risk-free rate be

A stock has an expected return of 15 percent, its beta is 1.35, and the expected return on the market is 13 percent. What must the risk-free rate be? (Do not round your intermediate calculations.)

  Coupon rate and semi annual coupons is trading

Suppose a ten-year, 1,000 bond with an 8.8% coupon rate and semi annual coupons is trading for 1,034.65. What is the bond's yield to maturity (expressed as an APR with semi annual compounding)? If the bond's yield to maturity changes to 9.5% APR, wha..

  Differently to effect a more financially sound future

Provide an example scenario with rationale of an area in your personal life in which you would like to apply, or have already applied, time value of money concepts. What might you do differently to effect a more financially sound future

  Organizations non operating and operating activities

If an organization's non operating and operating activities are profitable in a given year, which of the following statements is most correct?

  Calculate the project internal rate of return

J. Cena is looking to grow upon an existing project. The expansion requires an immediate outflow of $85 million. J.Cena anticipates the project will generate one future cash flow of $155 million that will arrive at the end of year 6, and only in that..

  Calculate payback period and internal rate of return (irr)

Company has an opportunity to make an investment with the estimated after tax cash flows

  How much is the current value of the potential credit risk

Tony Smith believes that the price of a particular underlying, currently selling at $96, will increase substantially in the next six months, so he purchases a European call option expiring in six months on this underlying. The call option has an exer..

  What is the default risk premium on keys bonds

Keys Corporation's 5-year bonds yield 5.70% and 5-year T-bonds yield 4.40%. The real risk-free rate is r* = 2.5%, the inflation premium for 5-year bonds is IP = 1.50%, the liquidity premium for Keys' bonds is LP = 0.5% versus zero for T-bonds, and th..

  Adding robotic paint sprayer to its production line

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $900,000, and it would cost another $22,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold afte..

  What is the firms debt and assets ratio

The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over. W..

  Calculate the annual return on the mutual funds

Suppose an individual invests $40,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 4.4 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating e..

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