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Tom has chosen to accept an adjustable rate mortgage. He qualified at a fully indexed rate of 7.5%, but is offered 6.0% as a discounted interest rate for the first 3 years of his loan. Tom 3/1 ARM will be based on the LIBOR index which stands at 4.5% today. The interest rate caps for his loan are 2/1/6.
A). What percentage is the lender margin for the loan?
B). What is the maximum interest rate & how long does Tom have to pay on the loan?
C). In year seven, Tom's ARM rate is about to adjust. The current arm rate has been 7.75%, but the index rate is now 5.25%. Taking into account the annual interest rate cap and the margin for His loan, what will the new interest rate be?
The pretax cost of debt is 6.7 percent and the cost of common stock is 10.4 percent. What percentage of the firm's capital funding should be debt financing if its tax rate is 30 percent?
Piano Tuners Unlimited is planning a promotional campaign at cost $6,000,000. The resultant after tax cash flows would be $500,000 each year in the absence of debt, and appropriate discount rate for an unlevered PTU would be 7.5 percent.
The required return on this stock is 10 percent, and the stock currently sells for $76 per share. What is the projected dividend for the coming year?
What is the appropriate discount rate for this project -A colleague argues that the project should not be taken because it is risky and the firm can't afford to take risks in a bad economy
Evaluating the future value of the investment and How much will Jayadev have at the end of 45 years
Preferred stock is used much less than long-term debt in the capital structure of most industrial and merchandising companies principally because:
It is April 1. The quoted price of a bond with an Actual/365 day count and 12% per annum coupon in the U.S. is 105. It has a face value of 100 and pays coupons on March 1 and Sept 1. What, to two decimal place accuracy, is the cash price?
Discuss two factors that may affect a person's credit score and apply the notion of moral hazard to your response.
Kay Mart owns an annuity that will begin making semiannual payments of $7500 in perpetuity to her or her heirs. The first payment will take place 3 years and 6 months from today. She is considering selling the annuity to an investor whose required..
Suppose you have $500,000 available to invest. The risk-free rate is 8 percent, and there is a fund in which you could invest that has an expected return of 16 percent.
Describe and discuss the concepts of federal deficit and the national debt. How statistically significant are they for the United States as compared to other countries? Discuss how the deficits and debt arise.
Jeremy Kohn is planning to invest in a 10-year bond that pays a 12 percent coupon. The current market rate for similar bonds is 9 percent. Assume semi-annual coupon payments.
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