Use the following information to answer the question: Loan amount: $245,000 Loan term: 30 years Contract interest rate: 6.00% Monthly payment: $1,468.8988 Total up-front financing costs paid to lender: $9,100 Up-front financing costs paid to third party service providers: $2.900 Calculate the lender's expected yield/IRR if the lender expects the borrower to keep the loan outstanding for the entire loan term. None of the selections is correct 6.36% O 6.00% 6.48%

Use the following information to answer the question: Loan amount: $245,000 Loan term: 30 years Contract interest rate: 6.00% Monthly payment: $1,468.8988 Total up-front financing costs paid to lender: $9,100 Up-front financing costs paid to third party service providers: $2.900 Calculate the lender's expected yield/IRR if the lender expects the borrower to keep the loan outstanding for the entire loan term. None of the selections is correct 6.36% O 6.00% 6.48%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 14P

See similar textbooks

Similar questions

Considering the following information, what is the net benefit if the borrower refinances the loan (benefit analysis, NOT NPV analysis)? Initial Loan balance: 723,000 Initial loan term: 30 years Current Loan interest: 5.75% Remaining term on current loan: 20 years New loan term: 15 years New loan interest: 2.50% Cost of refinancing: 3% of the loan amount Expected holding period: 8 years In Excel
In a discount interest loan, you pay the interest payment up front. For example, if a 1-year loan is stated as $34,000 and the interest rate is 9.50%, the borrower “pays” 0.0950 × $34,000 = $3,230 immediately, thereby receiving net funds of $30,770 and repaying $34,000 in a year. A. What is the effective interest rate on this loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) B. What is the effective annual rate on a 1-year loan with an interest rate quoted on a discount basis of 19.50%? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Given the following information about a fully amortized loan, calculate the lender’s yield (rounded to the nearest tenth of a percent) if the loan were to be paid off in 4 years. Loan amount: $568,000 Term: 30 years Interest rate: 8.23 % Monthly Payment: $4,259 Discount points: 1.5 3rd Party Costs: $7,500 8.60% 7.80% 8.70% 8.50%
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?
Consider a loan repayment plan described by the following initial value problem, where the amount borrowed is B(0) = $40,000, the monthly payments are $600, and B(t) is the unpaid balance of the loan. Use the initial value problem to answer parts a through c. B' (+) =0.03B - 600, B(0) = 40,000 a) Find the solution of the initial value problem and explain why B is an increasing solution. B(t) = Why is B an increasing function? O A. The function is increasing because it is an exponential function with a positive coefficient and a negative exponent. O B. The function is increasing because it is an exponential function with a positive coefficient and a positive exponent. O C. The function is increasing because it is an exponential function with a positive exponent. O D. The function is increasing because it is an exponential function with a positive coefficient. b) What is the most that you can borrow under the terms of this loan without going further into debt each month? The…
consider the following information, what is the NPV if the borrower refinances the loan? expected holding period: 5 years, currently laon balance: 100,000, current loan interest 9%, remaining term on currentl loan: 15, new loan interest 7.5%, new loan term 30 years, cost of refinancing 4,250
Considering the following information, what is the NPV if the borrower refinances the loan? Expected holding period: 3 years; current loan balance: $400,000; current loan interest: 5.875%; remaining term on current mortgage: 15 years; new loan interest: 3.625%; new loan term: 15 years; cost of refinancing: $6,000. Assume that the opportunity cost is 10%. Should the borrower refinance
You have been assigned to estimate the interest rates that your company may have to pay when borrowing money in the near future. The following information is available.kPR = 2%MR = 0.1% for a 1 year loan increasing by 0.1% for each additional yearLR = 0.05% for a 1 year loan increasing by 0.05% for each additional yearDR = 0 for a 1 year loan, 0.2% for a 2-year loan, increasing 0.1% for each additional yearExpected Inflation Rates Year 1 = 7% Year 2 = 5% Year 3 and thereafter = 3% a. Calculate the inflation adjustment (INFL) for a 5-year loan. b. Calculate the appropriate interest rate for a 5-year loan.
A borrower is purchasing a property for $180,000 and can choose between two possible loan alternatives. The first is a 90% loan for 25 years at 9% interest and the second is a 95% loan for 25 years at 9.25% interest. Assuming the loan will be held to maturity, what is the incremental cost of borrowing the extra money? 18.75% OO 14.34% 13.50% 12.01%
You are considering the following fixed interest rate mortgage loan alternatives: Alternative 1: $180,000 initial loan balance 4.00% annual nominal interest rate 30-year amortization schedule $859.35 monthly loan payment Alternative 2: $195,000 initial loan balance 4.25% annual nominal interest rate 30-year amortization schedule $959.28 What is incremental cost of borrowing the additional $15,000? (A) 0.58% --- Wrong (B) 4.25% (C) 5.8% --- Wrong (D) 7.01%
Your property has net operating income of 4,500,000. Assuming you value the property with a cap rate of 6.5%, what is the DSC ratio if the lender will lend up to 75% of value and the rate is 4.5% based on a monthly pay, 30 years, fully amortizing loan? Group of answer choices 1.43 1.35 1.51 1.27
Suppose a homeowner has an existing mortgage loan with these terms: Remaining balance of $150,000, interest rate of 8 percent, and remaining term of 10 years (monthly payments). This loan can be replaced by a loan at an interest rate of 6 percent, at a cost of 8 percent of the outstanding loan amount. Required: a. What is the net benefit of refinancing? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places. b. What is the NPV if the homeowner expects to be in the home for only five more years? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places. a. Net benefit of refinancing b. NPV $ + 6,552.77 1,819.91