PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 2, Problem 32PS
Amortizing loans Suppose that you take out a $200,000, 20-year mortgage loan to buy a condo. The interest rate on the loan is 6%, and payments on the loan are made annually at the end of each year.
- a. What is your annual payment on the loan?
- b. Construct a mortgage amortization table in Excel similar to Table 2.1, showing the interest payment, the amortization of the loan, and the loan balance for each year.
- c. What fraction of your initial loan payment is interest? What about the last payment? What fraction of the loan has been paid off after 10 years? Why is the fraction less than half?
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Suppose you take out a $117,000, 20-year mortgage loan to buy a condo. The interest rate on the loan is 5%. To keep things simple,
we will assume you make payments on the loan annually at the end of each year.
a. What is your annual payment on the loan?
b. Construct a mortgage amortization.
c. What fraction of your initial loan payment is interest?
d. What fraction of your initial loan payment is amortization?
e. What is the total of the loan amount paid off after 10 years (halfway through the life of the loan)?
f. If the inflation rate is 3%, what is the real value of the first (year-end) payment?
g. If the inflation rate is 3%, what is the real value of the last (year-end) payment?
h. Now assume the inflation rate is 6% and the real interest rate on the loan is unchanged. What must be the new nominal interest
rate?
i-1. Recompute the amortization table.
i-2. What is the real value of the first (year-end) payment in this high-inflation scenario?
j. What is the real value of the last…
A borrower has taken out a 30-year mortgage for $104,000 at an annual rate of 12%.
a. Use the table to find the monthly payment for this mortgage.
b. Construct the first three lines of an amortization schedule for this mortgage.
c. Assume that the borrower has decided to pay an extra $200 per month to pay off the mortga
more quickly. Find the first three lines of your payment schedule under this assumption.
Click the icon to view a table of monthly payments on a $1,000 loan.
a. The monthly payments for this mortgage are $
(Type an integer or a decimal.)
Enter your answer in the answer box and then click Check Answer.
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Consider a home mortgage of $17500 at a fixed APR of %6 for 15 years. a. Calculate the monthly payment. b. Determine the total amount paid over the term of the loan. c. Of the total amount paid, what percentage is paid toward the principal and what percentage is paid for interest.
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Chapter 2 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 2 - (FV) In 1880, five aboriginal trackers were each...Ch. 2 - Prob. 2SQCh. 2 - (PV) Your company can lease a truck for 10,000 a...Ch. 2 - (RATE) Ford Motor stock was one of the victims of...Ch. 2 - Prob. 5SQCh. 2 - Prob. 6SQCh. 2 - Prob. 7SQCh. 2 - (NOMINAL) What monthly compounded interest rate...Ch. 2 - Opportunity cost of capital Which of the following...Ch. 2 - Opportunity cost of capital Explain why we refer...
Ch. 2 - Prob. 3PSCh. 2 - Compound interest New Savings Bank pays 4%...Ch. 2 - Compound interest In 2017, Leonardo da Vincis...Ch. 2 - Future values If you invest 100 at an interest...Ch. 2 - Prob. 7PSCh. 2 - Future values In the five years preceding the end...Ch. 2 - Discount factors a. If the present value of 139 is...Ch. 2 - Prob. 10PSCh. 2 - Prob. 11PSCh. 2 - Present values What is the PV of 100 received in:...Ch. 2 - Prob. 13PSCh. 2 - Present values A factory costs 800,000. You reckon...Ch. 2 - Present values Recalculate the NPV of the office...Ch. 2 - Present values and opportunity cost of capital...Ch. 2 - Perpetuities An investment costs 1,548 and pays...Ch. 2 - Perpetuities You have just read an advertisement...Ch. 2 - Growing perpetuities A common stock will pay a...Ch. 2 - Prob. 20PSCh. 2 - Prob. 21PSCh. 2 - Annuities Kangaroo Autos is offering free credit...Ch. 2 - Annuities David and Helen Zhang are saving to buy...Ch. 2 - Prob. 24PSCh. 2 - Annuities Several years ago, The Wall Street...Ch. 2 - Prob. 26PSCh. 2 - Prob. 27PSCh. 2 - Prob. 28PSCh. 2 - Prob. 29PSCh. 2 - Annuities due A store offers two payment plans....Ch. 2 - Amortizing loans A bank loan requires you to pay...Ch. 2 - Amortizing loans Suppose that you take out a...Ch. 2 - Future values and annuities a. The cost of a new...Ch. 2 - Prob. 34PSCh. 2 - Growing annuities You are contemplating membership...Ch. 2 - Prob. 36PSCh. 2 - Growing perpetuities and annuities Your firms...Ch. 2 - Compounding intervals A leasing contract calls for...Ch. 2 - Compounding intervals Which would you prefer? a....Ch. 2 - Compounding intervals You are quoted an interest...Ch. 2 - Prob. 41PSCh. 2 - Continuous compounding How much will you have at...Ch. 2 - Continuous compounding The continuously compounded...Ch. 2 - Prob. 44PSCh. 2 - Annuities Use Excel to construct your own set of...Ch. 2 - Declining perpetuities and annuities You own an...
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