f you issue a thrifty year fixed rate mortgage to finance the purchase of a home you are locked into this rate for thirty years even if interest rates decline over time. You have know way out of this contract other than default. True or False Principal payments due on a fixed rate mortgage decline over time. True False
Q: Compute the NPV statistic for Project Y. Explain whether or not the firm should accept or reject the…
A: Cost of capital = 0.10 or 10% Net present value (NPV) = ? Net present value is the difference…
Q: You just purchased a parcel of land for $40,000. To earn a 9% annual rate of return on your…
A: Future value of a present amount The future value (FV) for a present value (PV) that earns annual…
Q: Two treasury bonds (with semi-annual coupons) are traded. The first bond matures in six months, has…
A: Bond 1: Annual coupon rate = 8% Semi-annual rate = 8%/2 = 4% Dirty price “P” = $99.49 Let Face Value…
Q: Frederick Consulting had just landed a white whale of a customer, Wilfrid Laurier University, after…
A: Customer life time value is added is benefits derived from the customer by retaining the customer…
Q: A project with a life of 6 years is expected to provide annual sales of $380,000 and costs of…
A: Given: Particulars Base case Sales $380,000.00 Cost $269,000.00 Tax rate =21%
Q: Now let’s pretend that we buy an annuity at the age of 70 with how much money we have in total from…
A: Annuities are regular stream of cash flows as payments which occur for a defined period and at a…
Q: A P28,000 debt at 15% interest compounded semi-annually is to be amortized at P2,250 every 6 months.…
A: The following is the amortization table. From this we can answer the 3 questions. Please note the…
Q: Explain the cash conversion cycle, its funding requirements, and the key strategies for managing it.
A: The cash conversion cycle will be reflective of a liquidity metric which will be helpful in…
Q: The current stock price of Alcoco is $45, and the stock does not pay dividends. The instantaneous…
A: Stock value (St) = $45 Exercise price (K) = $50 Period (t) = 30 Days Risk-free rate (r) = 3% SD of…
Q: A mother wishes to have Php800,000 eight years from today for her son’s graduation. How much should…
A: Future value (FV) = Php800,000 Monthly interest rate (r) = 0.0116666666666667 (i.e. 0.14 / 12)…
Q: All rates in this question use semi-annual compounding. You observe a two year spot rate of 5.10%,…
A: Given: 2 year spot rate r2= 5.10% 1 year forward rate 2 years from now "f3" = 4.80% 3 year spot rate…
Q: The S&P 500 is currently at a value of 4,130 (as of July 29th, 2022 market close). On the same day,…
A: The futures price can be determined with the formula below:Futures Price = Spot price x e(r-y)T =…
Q: A new homeowner, Ms. Dee Young, needs to decide whether to install R-11 or R-19 insulation in the…
A: Future worth of any cost would be the initial cost and interest being accumulated over the period of…
Q: efferson Company is a merchandiser located in western North Carolina. You serve on the company’s…
A: Time Value of money This is a foundational idea in finance. The Principle is that a quantity of…
Q: Approximately , what is the value of ( P ) it F - 114140 , n - 9 years , and in 8 % per year ? a .…
A:
Q: Martin had a successful small business before a recession hit his community. Martin believes the…
A: As per our guidelines we are supposed to answer only one question (if there are multiple questions…
Q: General Computers Inc. purchased a computer server for $70,000. It paid 35.00% of the value as a…
A: Purchase of Computer Server = $70,000 Down payment = $24,500 (being 35% of $70,000) A loan is taken…
Q: Earnest T needs $870 for his next trip to Raleigh. He has $540 in cash. How long in years will it…
A: We will use the concept of time value of money here. As per the concept of time value of money the…
Q: Find the nominal rate which when compounded semiannually and applied to a P50,000 principal will…
A: Let us note the given.Principal P = 50,000Interest I = 5000Amount A = P+I = 50,000 + 5000 =…
Q: Question 11 11) The general rule of thumb when considering financing is to O work more on raising…
A: Financing is referred as the process of the raising the capital or the funds for the different types…
Q: Which of the following earns a fixed rate of return? Whole life insurance. Term-life insurance.…
A: There are two main types of life insurance:- Term life insurance and whole life insurance. Term life…
Q: Caspian Sea Drinks is considering the purchase of a plum juicer – the PJX5. There is no planned…
A: IRR Internal rate of return (IRR) is the rate to be earned from a capital project. It is the…
Q: chemicals, and also manufactures fertilizers and food additives. Gupta has concluded that the DDM is…
A: Equity fund refers to the mutual fund schemes that are based on the investment objective of the…
Q: The amount of $122,000 is invested todat at a rate of 8.77% per annum, with monthly compounding,…
A: Time Value of money states that a dollar today is worth more than any time in the future, this is…
Q: calculate the beta of the portfolio below consisting of assets x, y and z. discuss the meaning of…
A: Beta of an asset represents the volatility with respect to the market. It measures the systematic…
Q: Why would an entrepreneur consider selling their business
A: There could be several reasons for an entrepreneur consider selling their business.
Q: Cost of Equity: Dividend Growth Summerdahl Resort's common stock is currently trading at $38 a…
A: To calculate the cost of common equity we will use the below formula Cost of common equity =…
Q: I need the show your work version not excel answer. Please show your work. Thank you
A: Future value of a present amount With present value (PV), interest rate (r) and period (n), the…
Q: Pessimus stock's rate of return over the past 5 years was: 5%, -2%, 10%, 12%, -8%. What was its…
A: Return of year-1 = 5% Return of year-2 = -2% Return of year-3 = 10% Return of year-4 = 12% Return of…
Q: To attend school, Arianna deposits $160 at the end of every month for three and one-half years. What…
A: To calculate the accumulated amount we will use the below formula Accumulated amount =…
Q: Upon graduating from college 35 years ago, Dr. Nick Riviera was already planning for his…
A: Given: Payment made in retirement account as annuity “PMT” = $250 Number of quarters of payment =…
Q: In the CRR notation, a share is worth $14, the up factor is 1.16 and the down factor is 0.95. What…
A: Risk neutral probability is very important concept while determining the value of call option and…
Q: more description on key strategies
A: The period from the start of the production process to the collecting of money from the sale of the…
Q: Table 1 shows market data of Smith PLC. Calculate the on Balance Volume. Table 1 Date Open…
A: On balance volume (OBV) is cumulative volume calculated on the following formulaIf current closing…
Q: Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant and the…
A: The internal rate of return is defined as the discount rate at which the project's return equals the…
Q: a. Compute the inventory turnover ratio (ITR). b. Compute the weeks of supply (WS).
A: Inventory Turnover Ratio (ITR) = Cost of Goods sold/Total Inventory Total Inventory = Value of…
Q: For the question below use the following figures which illustrate the production possibilities…
A: First let us calculate advantage of Farmer over the rancher.Farmer can produce 4 pounds of potato…
Q: our firm is evaluating a capital budgeting project. The estimated cash flows appear below. The board…
A: Net present value is the difference between the present value of cash flow and initial investment…
Q: Nadhirah needs to pay RM168.28 every month for a loan of RM7,000 from XYZ Bank at 7.2% compounded…
A: Given, The monthly payment is RM 168.28 Loan amount is RM 7000 Rate is 7.2% compounded monthly
Q: A database marketing firm can lease its computer equipment with beginning-of-quarter payments of…
A: Quarterly lease payment (Q) = $10,000 Loan amount (L) = $131,200 Resale value (Z) = $33,000…
Q: 2. John invests $4000 compounded half - yearly in a bank that pays compound interest at the rate of…
A: Compound interest is one of the type of interest under which interest is charged on both principal…
Q: Colossus Company has the ability to obtain debt financing at 10 percent. It currently has $2,000,000…
A: The cost of debt will be reduced from the profit before calculation of tax on income, which means…
Q: When valuing a short-term security, we commonly use:
A: Short term securities are those securities that are expected to be held for a period of less than…
Q: Can you estimate the annual rate of return to grow $5,000 to $20 million in 51 years? Show cash…
A: The following information is provided.FV = 20,000,000PV = 5000n = 51 years Annual rate of return can…
Q: Project A requires an original investment of $66,800. The project will yield cash flows of $19,800…
A: Net Present Value: The difference between the value of cash today and the worth of cash at a future…
Q: a) Calculate Kopitiam Sdn Bud’s accounts receivable turnover ratio for Year 2 and Year 3.…
A: a) Accounts receivable turnover ratio:- net sales/average account receivables. b) Days of accounts…
Q: Suppose rRF = 3%, rM = 8%, and rA = 7%. Calculate Stock A's beta. Round your answer to one…
A: We will use the CAPM model here. CAPM is the capital asset pricing model. This model describes the…
Q: 3. Consider an all-pay auction in which the two bidders' values are uniformly distributed between…
A:
Q: They want to invest around $50,000 and they are expecting good growth in the next 5 years. As they…
A: Cost of Condo varies due to variety of reason like i) Location ii) Unit type, amenities and…
Q: The Dog House has net income of $3,450 and total equity of $8,600. The debt-equity ratio is .60 and…
A: Return on asset = Return on equity/(1+Debt equity ratio) Return on equity = Net Income/Total equity…
-
If you issue a thrifty year fixed rate mortgage to finance the purchase of a home you are locked into this rate for thirty years even if interest rates decline over time. You have know way out of this contract other than default.
True or
False
-
Principal payments due on a fixed rate mortgage decline over time.
True
False
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- Your mortgage has 21 years left, and has an APR of 8.707% with monthly payments of $1,449. a. What is the outstanding balance? b. Suppose you cannot make the mortgage payment and you are in danger of losing your house to foreclosure. The bank has offered to renegotiate your loan. The bank expects to get $125,507 for the house if it forecloses. They will lower your payment as long as they will receive at least this amount (in present value terms). If current 21-year mortgage interest rates have dropped to 5.660% (APR), what is the lowest monthly payment you could make for the remaining life of your loan that would be attractive to the bank? a. What is the outstanding balance? The outstanding balance is $ (Round to the nearest cent.)Your mortgage has 24 years left, and has an APR of 6.303% with monthly payments of $1,449. a. What is the outstanding balance? b. Suppose you cannot make the mortgage payment and you are in danger of losing your house to foreclosure. The bank has offered to renegotiate your loan. The bank expects to get $161,182 for the house if it forecloses. They will lower your payment as long as they will receive at least this amount (in present value terms). If current 24-year mortgage interest rates have dropped to 4.097% (APR), what is the lowest monthly payment you could make for the remaining life of your loan that would be attractive to the bank? a. What is the outstanding balance? The outstanding balance is $______________ (Round to the nearest cent.) b. Suppose you cannot make the mortgage payment and you are in danger of losing your house to foreclosure. The bank has offered to renegotiate your loan. The bank expects to get $161,182 for the house if it forecloses.…A mortgage that allows the borrower to pay less than the interest due for a few year (A) negative-amortization mortgage.. B credit-default swap. C) traditional, thirty-year fixed-rate mortgage. D "liar loan".
- Your mortgage has 22 years left, and has an APR of 9.535% with monthly payments of $1,449. a. What is the outstanding balance? b. Suppose you cannot make the mortgage payment and you are in danger of losing your house to foreclosure. The bank has offered to renegotiate your loan. The bank expects to get $119,799 for the house if it forecloses. They will lower your payment as long as they will receive at least this amount (in present value terms). If current 22-year mortgage interest rates have dropped to 6.198% (APR), what is the lowest monthly payment you could make for the remaining life of your loan that would be attractive to the bank?Which of the following is NOT typically a benefit of taking a 15 year mortgage instead of a 30 year mortgage? Less total payments. Lower monthly payment Less total money paid back on the loan. Lower interest rate.Which of the following statements is true about 15-year and 30-year fixed-payment mortgages? A. A 30-year mortgage will likely have an interest rate lower than that on a 15-year mortgage. B. Borrowers pay more total interest over the life of a 30-year mortgage than on a 15-year mortgage assuming the same interest rate on both mortgages. C. The remaining balance on a 30-year loan declines more quickly than on a 15-year mortgage with the same interest rate. D. Both A and B are true. E. Both B and C are true. F. Both A and C are true. G. All three (A, B and C) are true.
- How is a home mortgage an example of Time Value of Money? What would you expect the impact of varying terms (years needed to pay off the loan) and rates to be using TVM rules? Why do homeowners sometimes refinance their mortgages?1) The amount of down payment one makes on a home directly affects the size of the monthly payments a. True b. False 2) A monthly payment of $ 850 on a 30 year $ 80,000 mortgage results in a total cost of interest of $ 306,000. a. True b. False 3) What are the points on a mortgage?If you plan to live in a home for only a few years, it is probably wise to pay points to lower your mortgage rate. True False
- Suppose you have just purchased your first home for $550,000. At the time of purchase you could only afford to commit to a down payment of $55,000. In order to make the loan, the lender requires you to obtain private mortgage insurance (PMI) on their behalf. Suppose over time you paid down the principal of the loan to $535,000 and at that point in time you can no longer make any mortgage payments (i.e., you default on the loan). If the lender were to foreclose on your property and sell it for $508,000 (net proceeds), what would the lender's loss of principal be taking into consideration the protection of mortgage insurance? (Let's assume that the PMI in this case covers the top 25% of the loan.)9. Which two of the following statements is FALSE (CHOOSE TWO) a. In an ordinary annuity, payments are made at the end of each payment period. b. A mortgage can be considered an annuity. C. Accepting a payment plan for a purchase results in spending the same amount as the original price but spread out over a longer time period. d. Monthly car payments includes interest e. Quarterly payments are made every 4 months. f. The future value of an ordinary simple annuity can be calculated as the sum of a series compound follow the qu ransw age on ouve d be abl interest calculations our rouIn the past a common practice for selling a home was to allow the buyer to "assume the mortgage" this meant that the buyer would be able to take over the existing mortgage of the seller. The advantage of doing this was that the existing mortgage might have a lower interest rate than the current mortgages. Suppose that a seller of a home has an interest rate of 3% on his existing mortgage and it is locked in for the next 5 years. Suppose also that the best interest rate buyers can ger for a new mortgage is 6%. If the mortgage is assumed by the buyer, who benefits: the buyer or the seller? Explain