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Suppose that five years ago you borrowed $500,000 using a 30-year fixed-rate mortgage with an annual interest rate of 8% with monthly payments and compounding. The interest rate on 30-year fixed-rate mortgages has fallen to 7.5% and you are wondering whether you should refinance the loan. Refinancing costs are expected to be 5% of the new loan amount.
What is the net present value of refinancing if you make all of the scheduled payments on the new loan?
What is the net present value of refinancing if you pay off the new loan at the end of the 3rd year?
How many payments do you need to make on the new loan in order for refinancing to have a positive net present value?
Top hedge fund manager Diana Sauros believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $51. The stock will pay a dividend at year-end of $3.00. Assume that risk-free Treasury securities currently offer ..
You buy a 20-year bond with a coupon rate of 8.8% that has a yield to maturity of 9.8%. (Assume a face value of $1,000 and semiannual coupon payments.) Six months later, the yield to maturity is 10.8%. What is your return over the 6 months?
The treasurer of a major U.S. firm has $36 million to invest for three months. The interest rate in the United States is .24 percent per month. The interest rate in Great Britain is .30 percent per month. The spot exchange rate is £.635, and the thre..
Company A has assets worth $100,000,000. The company has a 0.2 debt-to-value ratio and keeps a constant-debt policy. Company A decides unexpectedly to reduce its debt by a half replacing it with equity, keeping the debt constant thereafter. The inter..
Calculate the daily percentage change in price for each stock. - Calculate a price-weighted average for Days 1-6.- Calculate a market-weighted average for Days 1-6.
An amortized loan is repaid with annual payments which start at $400 at the end of the first year and increase by $45 each year until a payment of $1,48- is made, after which they cease. If interest is 4% effective, find the amount of principal in th..
The City of Sustainberg started 2016 with $500,000 in cash reserves. In 2016, they expect to spend $1.75 million, and they’ve forecasted $1.8 million in revenues. Their revenues are growing at a rate of 2% per year. Their expenses are growing at a ra..
Cactus Cushions, a non-traditional pillow manufacturer, is considering a new capital investment project that requires a $40 million investment today. Next year, the project will generate expected pre-tax cash flows of $2 million, all of which are tax..
Mr. Richards needs more analysis to update his client presentations. He would like additional future value calculations. Using the same framework, calculate the future value pf the bank CD's that would pay 1% and 2% annual interest. Show the compound..
Which of the following will result in higher owners' equity, all else equal?
A bond has a $1,000 par value, 7 years to maturity, and a 9% annual coupon and sells for $1,095. What is its yield to maturity (YTM)? Assume that the yield to maturity remains constant for the next 4 years. What will the price be 4 years from today? ..
Speedilectrix Co. has a quick ratio of 2.00x, $28,800 in cash, $16,000 in accounts receivable, some inventory, total current assets of $64,000 and total current liabilities of $22,400. The company reported annual sales of $200,000 in the most recent ..
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