Need Help solving this problem with excel functions Chapter 8. Finance Applications. Refer to the PI Mortgages Examplein the book about a firm that provides mortgages to finance variousinvestments. Now imagine that just like PI Mortgages, a small startup investment company called Smartlnc has $1.5 million to invest.There are five categories of loans, each with an associated return andrisk ranging from 1 to 10, with 1 being the best, and the risk ratingsare similar to what we saw in the PI Mortgage Example. However, theRates of Return are different in this new market. Just like PIM, if theyhave any uninvested money left over, the money is placed in asavings account with no risk and a 1.5% rate of return. Theinformation available is placed in the table here:Loan/InvestmentReturnRiskFirst Mortgages4%4Second Mortgages 8%6Personal Loans8%Commercial Loans6%3Govt. Securities2%1Savings1.5%The goal for the mortgage team at SmartInc is to allocate the moneyto the categories based upon the constraints placed by the Boardregarding how to spend the $1.5 million: • Maximize the average return per dollar• The average risk of the portfolio should not be more than 5 (not including the savings account)• At the most 20% of the investment (not counting savings account) should be made in commercial loans (NOTICE: this is a big change from the textbook example)• The amount invested in second mortgages and personal loans combined should not be higher than the amount invested in fırst mortgages.• At least 5% of the total budget has to be invested in Government Securities.Based on this information, give the following answers after creating a LP and analyzing it using the Solver in Excel:1. The Maximum value of Returns for Smartlnc based on your recommendations within the given constraints would be = $and the Net Rate ofreturn is%.2. Fill in the following table to indicate the amount of money to be invested in each type of investment (you can use whole numbers, no decimals or $ signsrequired).Investment Amount ($)FirstMortgagesSecondMortgagesPersonalLoansCommercialLoansGovt.SecuritiesSavings

Excel's Solver feature in the data section is excellent for increasing or decreasing the value of a…

• Maximize the average return per dollar • The average risk of the portfolio should not be more than 5 (not including the savings account) • At the most 20% of the investment (not counting savings account) should be made in commercial loans (NOTICE: this is a big change from the textbook example) • The amount invested in second mortgages and personal loans combined should not be higher than the amount invested in first mortgages. • At least 5% of the total budget has to be invested in Government Securities. Based on this information, give the following answers after creating a LP and analyzing it using the Solver in Excel: 1. The Maximum value of Returns for SmartInc based on your recommendations within the given constraints would be = $ return is 2. Fill in the following table to indicate the amount of money to be invested in each type of investment (you can use whole numbers, no decimals or $ signs required). Investment Amount ($) First Mortgages Second Mortgages Personal Loans Commercial Loans Govt. Securities %. Savings and the Net Rate of

• Maximize the average return per dollar • The average risk of the portfolio should not be more than 5 (not including the savings account) • At the most 20% of the investment (not counting savings account) should be made in commercial loans (NOTICE: this is a big change from the textbook example) • The amount invested in second mortgages and personal loans combined should not be higher than the amount invested in first mortgages. • At least 5% of the total budget has to be invested in Government Securities. Based on this information, give the following answers after creating a LP and analyzing it using the Solver in Excel: 1. The Maximum value of Returns for SmartInc based on your recommendations within the given constraints would be = $ return is 2. Fill in the following table to indicate the amount of money to be invested in each type of investment (you can use whole numbers, no decimals or $ signs required). Investment Amount ($) First Mortgages Second Mortgages Personal Loans Commercial Loans Govt. Securities %. Savings and the Net Rate of

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter1: Introduction To Finance For Entrepreneurs

Section: Chapter Questions

Problem 4EP

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Chapter 8. Finance Applications. Refer to the PI Mortgages Example in the book about a firm that provides mortgages to finance various investments. Now imagine that just like PI Mortgages, a small start up investment company called SmartInc has $1.5 million to invest. There are five categories of loans, each with an associated return and risk ranging from 1 to 10, with 1 being the best, and the risk ratings are similar to what we saw in the PI Mortgage Example. However, the Rates of Return are different in this new market. Just like PIM, if they have any uninvested money left over, the money is placed in a savings account with no risk and a 1.5% rate of return. The information available is placed in the table here: Loan/Investment Return Risk First Mortgages 4% 4 Second Mortgages 8% 6 Personal Loans 8% Commercial Loans 6% 3 Govt. Securities 2% 1 Savings 1.5% The goal for the mortgage team at Smartlnc is to allocate the money to the categories based upon the constraints placed by the…
Please build an excel spreadsheet and show the formulas to answer a. through g. using the information below You bought a house with price of $250,000. Your LTV (loan-to-value ratio) is 80%. You choose the 30-year mortgage with interest rate 6%. Assuming the total transaction cost is $10,000. a. What is your loan amount? b. What is your monthly payment? c. What will be the loan balance at the end of nine years? d. What is the effective borrowing cost if the loan will be prepaid at the end of nine years? e. In the monthly payment, how much you pay for the principle and how much you pay for the interest in the 1st and the 2nd month? f. What will be your interest payments for the first 5 years (year 1 to year 5) and the last 5 years (year 26 to year 30)? g. What is your annual percentage rate (APR)?
Suppose you need to borrow $200,000 to buy a home, and you are deciding between a 15 year mortgage and a 30 year mortgage. Research a bank offering 15 year and 30 year mortgage loans and find the interest rates on those loans. Use the techniques you learned in this Module to do the following: 1. Calculate the monthly payment for a 15-year mortgage and for a 30-year mortgage. 2. Find the total amount of interest you will pay on the 15 year mortgage and on the 30 year mortgage. 3. Describe some of the factors (financial and non-financial) that can influence whether to obtain a shorter term mortgage or a longer term mortgage. 4. Which mortgage would you take, the 15 year or the 30 year? Explain your decision.
Please show all steps and formulas in an excel spreadsheet to answer a. through g. using the information below! You bought a house with price of $250,000. Your LTV (loan-to-value ratio) is 80%. You choose the 30-year mortgage with interest rate 6%. Assuming the total transaction cost is $10,000. a. What is your loan amount? b. What is your monthly payment? c. What will be the loan balance at the end of nine years? d. What is the effective borrowing cost if the loan will be prepaid at the end of nine years? e. In the monthly payment, how much you pay for the principle and how much you pay for the interest in the 1st and the 2nd month? f. What will be your interest payments for the first 5 years (year 1 to year 5) and the last 5 years (year 26 to year 30)? g. What is your annual percentage rate (APR)?
You own a home that was recently appraised for $370,000. The balance on your existing mortgage is $117,350. If your bank is willing to loan up to 70% of the appraised value, what is the potential amount (in $) of credit available on a home equity loan? $ Need Help? Read It Watch It Master It
Being Finance Manager of Salalah Textiles Industries, you need to invest an amount for OMR 50,000 in the investment market. Assume the market rate of return is 0.11, risk free rate of return is 2.75% and Beta is .73, then:Required:a) What should be required rate of return for your investment?
Watch the Mathematics of Finance video and then answer the question given below. Simple interest loans are generally used for which type of loan? Click here to watch the video. Choose the correct description of a simple interest loan. A. Home Mortgage loans B. Short term loans of less than a year C. Car loans D. Long term loans of a year or more
3. An entrepreneur has two projects to choose between. Both require an investment of $1 which must be borrowed. The projects produce gross returns in one year as follows.: Project Risky Safe payoff if failure ($) payoff if success ($) 10 probability of success 2/10 6/10 Suppose there are 100 such entrepreneurs. A bank cannot observe the project choice of an entrepreneur. Call the gross repayment the loan requires when the project succeeds R: i What is the relationship between the R the bank charges and the project chosen by the entrepreneur? Explain in detail ii. Over what ranges of R will the safe and risky projects, respectively, be chosen? What is the maximum R banks can charge consistent with the entrepreneur choosing the safe project? Explain. ii. What R will banks charge and why?
Please solve via excel to show work. Q: Now that you have the RV all set, you want to have a fishing boat to go with it. The boat you want is a MODEST $61,250. You are able to place $2.120 in to an account at the end of each year. No balance on year 0. First deposit is on year 1. But, you know that won't get you there. You are expecing some bonds to mature soon (6 Years). Start the savings account now. 6 years from now, you will have money from bonds to apply to this loan. If you can get a 4.51% rate on you account (PYCY), how much do you need from your bonds to make this work?
Please show me how to solve this in excel using an excel spreadsheet and please show the excel formulas! Thank You! A house price of $100,000 can be financed with two loans below with monthly payments. The total origination cost associated with these two loans in the table attached is $3000. Alternatively, the borrower can borrow one loan in the amount of $90,000 with monthly payments and origination cost of $2,000. What should the interest rate be on the loan of $90,000 so that the borrower will be indifferent between these two choices?
After examining the various personal loan rates available to you, you find that you can borrow funds from a finance company at 8 percent compounded or from a bank at 9 percent compounded . Which alternative is more attractive?
Being Finance Manager of Salalah Textiles Industries, you need to invest an amount for OMR 50,000 in the investment market. Assume the market rate of return is 0.11, risk free rate of return is 2.75% and Beta is .73, then:Required:a) What should be required rate of return for your investment?b) Keeping the answer of question # 2a in mind, if different investment options are available with different returns in the investment market, for example:i. For investment in Project-A, 6.30% return is offered;ii. For investment in Project-B, 10.95% return is offered, andiii. For investment in Project-C, 5.65% return is offered.In above scenario, explain whether any why these investment options are overvalued or undervalued? Keeping the answer of question # 2a and 2b, what will be your investment decision (justify your answer with reasons)