Subject: Financial strategy & policy 1) A leasing contract calls for an immediate payment of $100,000 and nine subsequent $100,000 semiannual payments at six month intervals. What is the PV of these payments if the annual discount rate is 8 percent? 2) Siegefried Basset is 65 years of age and has a life expectancy of 12 more years. He wishes to invest $20,000 in an annuity that will make a level payment at the end of each year until his death. If the interest rate is 8 percent, what income can Mr. Basset to receive each year?
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Subject: Financial strategy & policy
1) A leasing contract calls for an immediate payment of $100,000 and nine subsequent $100,000 semiannual payments at six month intervals. What is the PV of these payments if the annual discount rate is 8 percent?
2) Siegefried Basset is 65 years of age and has a life expectancy of 12 more years. He wishes to invest $20,000 in an
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- Using the information provided, what transaction represents the best application of the present value of an annuity due of $1? A. Falcon Products leases an office building for 8 years with annual lease payments of $100,000 to be made at the beginning of each year. B. Compass, Inc., signs a note of $32,000, which requires the company to pay back the principal plus interest in four years. C. Bahwat Company plans to deposit a lump sum of $100.000 for the construction of a solar farm In 4 years. D. NYC Industries leases a car for 4 yearly annual lease payments of $12,000, where payments are made at the end of each year.14) You are considering borrowing OMR150,000 to purchase a new home. a. Calculate the monthly payment needed to amortize an 8 percent, fixed-rate, 30-year mortgage loan. b. Calculate the monthly amortization payment if the loan in (a) was for 15 years.A borrower can obtain an 80 percent loan with an 9 percent interest rate and monthly payments. The loan is to be fully amortized over 25 years. Alternatively, he could obtain a 95 percent loan at an 9.5 percent rate with the same loan term. The borrower plans to own the property for the entire loan term. Required: a. What is the incremental cost of borrowing the additional funds? (Hint: The dollar amount of the loan does not affect the answer.) b. What is the incremental cost of borrowing the additional funds if 2 points were charged on the 95 percent loan? c. What is the incremental cost of borrowing the additional funds if the borrower planned to own the property for only five years? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the incremental cost of borrowing the additional funds if the borrower planned to own the years? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Incremental…
- A borrower can obtain an 85 percent loan with an 6 percent interest rate and monthly payments. The loan is to be fully amortized over 25 years. Alternatively, he could obtain a 95 percent loan at an 6.5 percent rate with the same loan term. The borrower plans to own the property for the entire loan term. Required: a. What is the incremental cost of borrowing the additional funds? (Hint: The dollar amount of the loan does not affect the answer.) b. What is the incremental cost of borrowing the additional funds if 2 points were charged on the 95 percent loan? c. What is the incremental cost of borrowing the additional funds if the borrower planned to own the property for only five years?(3) A man has a loan of 500,000 for 10 years at 6.5% annually with annual payments. His payments are 45,000 for the first 5 years and X for the next 5 years. Find X. Construct the amortization schedule for this loan." (4) An amortizedA borrower can obtain an 80 percent loan with an 8 percent interest rate and monthly payments. The loan is to be fully amortized over 25 years. Alternatively, he could obtain a 90 percent loan at an 8.5 percent rate with the same loan term. The borrower plans to own the property for the entire loan term. a. What is the incremental cost of borrowing the additional funds? (Hint: The dollar amount of the loan does not affect the answer.) b. What is the incremental cost of borrowing the additional funds if 2 points were charged on the 90 percent loan? c. What is the incremental cost of borrowing the additional funds if the borrower planned to own the property for only five years?
- A borrower can obtain an 80 percent loan with an 8 percent interest rate and monthly payments. The loan is to be fully amortized over 25 years. Alternatively, he could obtain a 90 percent loan at an 8.5 percent rate with the same loan term. The borrower plans to own the property for the entire loan term. a. What is the incremental cost of borrowing the additional funds? (Hint: The dollar amount of the loan does not affect the answer.) b. How would your answer change if two points were charged on the 90 percent loan? c. Would your answer to part (b) change if the borrower planned to own the property for only five years?a. What is the amount of the annuity purchase required if you wish to receive a fixed payment of $250,000 for 20 years? Assume that the annuity will earn 12 percent per year. b. Calculate the annual cash flows (annuity payments) from a fixed-payment annuity if the present value of the 20-year annuity is $1.5 million and the annuity earns a guaranteed annual return of 12 percent. The payments are to begin at the end of the current year. c. Calculate the annual cash flows (annuity payments) from a fixed-payment annuity if the present value of the 20-year annuity is $1.5 million and the annuity earns a guaranteed annual return of 12 percent. The payments are to begin at the end of five years. (For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))A builder is offering $107, 960 loans for his properties at 9 percent for 25 years. Monthly payments are based on current market rates of 9.5 percent and are to be fully amortized over 25 years. The property would normally sell for $120,000 without any special financing. Required: a. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan? Assume that the buyer would have the loan for the entire term of 25 years. b. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan if the property is resold after 10 years and the loan repaid?
- An investor has $60,000 to invest in a $280,000 property. He can obtain either a $220,000 loan at 9.5 percent for 20 years or a $180,000 loan at 9 percent for 20 years and a second mortgage for $40,000 at 13 percent for 20 years. All loans require monthly payments and are fully amortizing.a. Which alternative should the borrower choose, assuming he will own the property for the full loan term?b. Would your answer change if the borrower plans to own the property for only five years?c. Would your answers to (a) and (b) change if the second mortgage had a 10-year term?#1) Time value: Annuities Marian Kirk wishes to select the better of two 10-year annuities,C and D. Annuity C is an ordinary annuity of $2,500 per year for 10 years. AnnuityD is an annuity due of $2,200 per year for 10 years.a. Find the future value of both annuities at the end of year 10 assuming that Mariancan earn (1) 10% annual interest and (2) 20% annual interest.c. Find the present value of both annuities, assuming that Marian can earn (1) 10%annual interest and (2) 20% annual interest. #2) Retirement planning Hal Thomas, a 25-year-old college graduate, wishes to retire atage 65. To supplement other sources of retirement income, he can deposit $2,000each year into a tax-deferred individual retirement arrangement (IRA). The IRA willearn a 10% return over the next 40 years.a. If Hal makes annual end-of-year $2,000 deposits into the IRA, how much will hehave accumulated by the end of his sixty-fifth year?b. If Hal decides to wait until age 35 to begin making annual end-of-year…Sam is negotiating to purchase an annuity of $50 000 p.a. for 10 years. Funds currently earn 6% p.a. To sweeten the deal, the supplier offers (a) to make it an annuity due (with 10 payments in total) or (b) to add an extra payment of $10 000 to be paid immediately. Which is the better deal for Sam, if the price remains the same? Please do fast ASAP fast