Assume interest is paid in full at the end of each year. a. How much would Sauer Food Company save in interest over the three-year life of the computer system if the one-year loan is utilized and the loan is rolled over (reborrowed) each year at the same 11 percent rate? Compare this to the 13 percent three- year loan. 11 percent loan 13 percent loan Interest savings Interest b. What if interest rates on the 11 percent loan go up to 16 percent in year 2 and 19 percent in year 3? What would be the total interest cost compared to the 13 percent, three-year loan? Fixed-rate 13% loan Variable-rate loan Interest

Assume interest is paid in full at the end of each year. a. How much would Sauer Food Company save in interest over the three-year life of the computer system if the one-year loan is utilized and the loan is rolled over (reborrowed) each year at the same 11 percent rate? Compare this to the 13 percent three- year loan. 11 percent loan 13 percent loan Interest savings Interest b. What if interest rates on the 11 percent loan go up to 16 percent in year 2 and 19 percent in year 3? What would be the total interest cost compared to the 13 percent, three-year loan? Fixed-rate 13% loan Variable-rate loan Interest

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

A borrower made a constant payment mortgage loan 8 years ago for $400,000 at 12 percent interest for 30 years. 1. What is the monthly payment? 2. What is the current loan balance? 3. Assume this is homeowner has been offered a chance for refinance for the amount at the current balance for 22 years at 10.5% interest rate. What is the monthly payment if the homeowner chooses to refinance? 4. If the origination fees and closing costs are $25,500, and the costs are not financed by the lender. What is the effective cost of refinancing? Should this homeowner refinance? 5. If this homeowner plans to sell the house in 5 years, should this homeowner refinance (show your answer with the effective annual rate)? use excel to get the answers and show the formulas
what is the present value of a loan that calls for the payment of $500 per year for six years if the discount rate is 10 percent and yne forst payment will be made one year from now ? how would your answer change if $500 per year occured for ten years ?
Suppose you want to purchase a home for $525,000 with a 30-year mortgage at 4.84% interest. Suppose also that you can put down 30%. What are the monthly payments? (Round your answer to the nearest cent.) $ What is the total amount paid for principal and interest? (Round your answer to the nearest cent.) $ What is the amount saved if this home is financed for 15 years instead of for 30 years? (Round your answer to the nearest cent.)
With the following information, compute the net benefit of refinancing: Current loan balance: $200,000 Remaining term: 15 years Interest rate: 6.5% Old loan monthly payment: $1742.22 Expected number of future payments you will make: 72 Interest rate available on a new loan: 4.5% Cost of refinancing:5% of the outstanding balance. what is the resulting net benefit?
Present value with periodic rates. Cooley Landscaping needs to borrow $25,000 for a new front-end dirt loader. The bank is willing to loan the money at 8% interest for the next 6 years with annual, semiannual, quarterly, or monthly payments. What are the different payments that Cooley Landscaping could choose for these different payment plans? C What is Cooley's payment for the loan at 8% interest for the next 6 years with annual payments? $ (Round to the nearest cent.)
← You have just negotiated a home mortgage with a principal of $350,000. The bank's quoted rate is 6.3%. You chose a 20-year amortization and you decide to make 12 payments per year. Each mortgage payment is $2,551.90. How much interest do you pay in the first year? Express your answer as a percentage of the total value of your mortgage payments in the first year. The interest as a percentage of the total payments in year 1 is %. (Round to four decimal places as needed.)
If you could solve option 5 with the formulas please Option 5: Half the required money is taken out of an investment account that pays monthly interest at a 3% annual rate. The rest of the money is borrowed from a bank at a 4% annual interest rate, should payback within 3 years in equal monthly payments. Find the future value of the money taken from the investment account at the end of the shop development and periodic payments to the bank. Calculate Cumulative interest and principal payments.
Suppose that you are about to borrow $10,000 from a bank. Suppose you will be repaying using end-of-year annual payments. What will be your annual uniform payment over 8 years with 10% nominal interest compounded monthly? What will be your annual uniform payment over 7 years with 10% nominal interest compounded continuously?
What size loan must we take today with a 14% compound interest rate to have end-of-year payments of $1400, $1320, $1240, $1160, and $1080 for the next five years, respectively? In other words, if you take out a loan today, and after making all five payments, above, the loan is paid off, what is the value of that loan? Answer:
Decreasing the number of years of a loan decreases the amount of interest repaid over the term of the loan. Suppose a dental hygienist has the option of a 30-year loan or a 25-year loan of $395.000 at an annual interest rate of 4.75%. (a) Calculate the monthly payment (in dollars) for each loan. (Round your answers to the nearest cent.) 30-year loan $? 25-year loan $? (b) Calculate the savings in interest (in dollars) by using the 25-year loan. (Round your answer to the nearest cent.)
SUBJECT: ENGINEERING ECONOMICS (a) Identify the Given and the Unknown or what is being asked in the problem (b)Provide the formula to be used (c)Show the complete solution. The final answer is already provided. You plan to deposit P100 into a savings account at the end of each month for the next 5 years. a.)At 3% compounded monthly, how much will you have accumulated at the end of 5 years? b.)How much difference would it make if the payments were made at the beginning of the month rather than at the end? Answer: a.) F = P6,464.67, b.) F value difference = P196.63
a) Suppose you have $50,000 to invest in a savings account that pays interest annually with a 5-year term. After 5 years, you want to have $70,000 in your account. What annual interest rate do you need to earn on your investment to achieve this goal? b) Does the interest rate change if it compounds semi-annually instead of an annual compounding, as mentioned in (a)?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS