Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- 12. Amortized loans Mortgages and other amortized loans (meaning equal or blended payments) involve regular payments at fixed intervals. These are sometimes called reverse annuities, because you get a lump-sum amount as a loan in the beginning, and then you make the periodic payments (usually monthly or more frequently, depending on the agreement) to the lender. You've decided to buy a house that is valued at $1 million. You have $400,000 to use as a down payment on the house, and you take out a mortgage for the rest. Your bank has approved your mortgage for the balance amount of $600,000 and is offering you a 25-year mortgage with 12% fixed nominal interest rate (called the APR, or Annual Percentage Rate) compounded semiannually. According to this proposal, what will be your monthly mortgage payment? OOO $7,740 $6,192 $8,359 $9,598 Your friends suggest that you take a 15-year mortgage, because a 25-year mortgage is too long and you will lose a lot of money on interest. If your bank…arrow_forwardi need the answer quicklyarrow_forwardQUESTION 5 Given the following information, calculate the loan-to-value ratio (LTV) ratio for this property. Assume that there are no discount points or other up-front financing costs associated with the mortgage. Acquisition price: Equity investment: Mortgage term: Mortgage interest rate: 33.3% 66.7% 50% 80% $675,000 $225,000 25 years 8.0% annuallyarrow_forward
- Question 1 Seroja Berhad (Seroja) wishes to evaluate the following two alternatives available to acquire a machine: Lease Alternative Seroja can lease the machine under a 5-year lease requiring lease payment of RM5,000 at the beginning of each year. All maintenance costs will be borne by the lessor and the insurance and other costs will be borne by the lessee. "Borrowing to Buy" Alternative The machine costs RM20,000 and will have a 5-year life. The purchase will be financed by a 5- year, 15% interest. Seroja will pay RM1,000 per year for a service contract that covers insurance and other costs. Seroja Berhad plans to keep the machine and use it beyond its 5-year life. The machine will be depreciated as given below: Year Depreciation RM 1 5,000 2 4,000 3 3,000 4 2,000 5 1,000 Given that the corporate tax rate is 30%. From the above information you are required to answer the following questions. a. Give explanation to Seroja on ONE (1) benefit of leasing. b. Prepare the Cash Flows…arrow_forwardConsider three alternatives A, B, and "do-nothing." (a) Construct a choice table for interest rates from 0% to 100%. Year A B 0 1-5 –$10,000 3,200 -$15,000 4,500arrow_forwardHardevarrow_forward
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