1. (1 point) You plan to borrow $100,000 at 7.5%, compounded annually with payments at the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
1. (1 point) You plan to borrow $100,000 at 7.5%, compounded annually with payments at the end of each year. The length of the loan is ten years. How big should your annual payments be? 2. (1 point) A friend has asked for your help determining whether she should invest in a property. She tells you that the property will have annual cash flows of $12,000 during the first two years and will increase by $2,000 every two years. She plans to keep the property for six years and then sell it for an expected price of $300,000. She has an annual discount rate of 8%, and the current market price for the property is $260,000. Calculate the NPV of this investment opportunity. Should your friend invest in this property? Would your answer change if the discount rate drops to 7%? What should be the required discount rate to start investing in this property? (Round your answers to two decimals). 3. (1 point) Patrick received a mortgage for a property he was interested in investing in for a while. The mortgage lasts thirty years with a 6.75% annual interest rate for a loan of $500,000. Calculate the interest and principal payments for the first six years of the mortgage. (Show your calculations). What will be the remaining principal balance at the end of the 17th and 27th years? (You only need to specify these two numbers). 4. (1 point) You have an apartment for rent. One potential tenant has promised to sign an annual lease for eight years, with each year's rent (paid at the end of the year) of $32,000. Rather than make annual payments, a second tenant has offered to pay you an upfront single cash payment for the use of the apartment over the next eight years. If your discount rate is 9%, what minimum single cash payment would make you sign the lease with the second tenant? 1. (1 point) You plan to borrow $100,000 at 7.5%, compounded annually with payments at the end of each year. The length of the loan is ten years. How big should your annual payments be? 2. (1 point) A friend has asked for your help determining whether she should invest in a property. She tells you that the property will have annual cash flows of $12,000 during the first two years and will increase by $2,000 every two years. She plans to keep the property for six years and then sell it for an expected price of $300,000. She has an annual discount rate of 8%, and the current market price for the property is $260,000. Calculate the NPV of this investment opportunity. Should your friend invest in this property? Would your answer change if the discount rate drops to 7%? What should be the required discount rate to start investing in this property? (Round your answers to two decimals). 3. (1 point) Patrick received a mortgage for a property he was interested in investing in for a while. The mortgage lasts thirty years with a 6.75% annual interest rate for a loan of $500,000. Calculate the interest and principal payments for the first six years of the mortgage. (Show your calculations). What will be the remaining principal balance at the end of the 17th and 27th years? (You only need to specify these two numbers). 4. (1 point) You have an apartment for rent. One potential tenant has promised to sign an annual lease for eight years, with each year's rent (paid at the end of the year) of $32,000. Rather than make annual payments, a second tenant has offered to pay you an upfront single cash payment for the use of the apartment over the next eight years. If your discount rate is 9%, what minimum single cash payment would make you sign the lease with the second tenant?
Expert Answer:
Answer rating: 100% (QA)
1 To calculate the annual payments for a loan with compound interest we can use the formula for the present value of an annuity PV Pmtfrac1 1 rnr Where PV Present value of the loan 100000 Pmt Annual p... View the full answer
Related Book For
Intermediate Algebra
ISBN: 9780134895987
13th Edition
Authors: Margaret Lial, John Hornsby, Terry McGinnis
Posted Date:
Students also viewed these accounting questions
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
You have just had a tenant sign a lease contract that guarantees you payments of $100,000 at the end of each year for the next five years. What is the present value of these future cash flows...
-
Sita lived in a village and could, not afford refrigerator in her house. She knew how to keep water cold and preserve all perishable items in her house. She kept ivet cloth surrounding the earthen...
-
In this project you will be researching your state's correctional system - covering both community-based and institutional settings. Create a PowerPoint presentation Your Assignment must address the...
-
One hundred electrical components each dissipating 25 W, are attached to one surface of a square (0.2 m x 0.2 m) copper plate, and all the dissipated energy is transferred to water in parallel flow...
-
A rectangular loop of length \(\ell=80 \mathrm{~mm}\), width \(w=\) \(60 \mathrm{~mm}\), and resistance \(R=20 \mathrm{~V} / \mathrm{A}\) is located in a uniform magnetic field of magnitude \(B=0.50...
-
A stream of Liquid n-pentane flows at a rate of 50.4L/min into a heating chamber, where it evaporates into a stream of air 15% in excess of the amount needed to burn the pentane completely. The...
-
8. A dielectric slab of dielectric constants k is slowly inserted inside the parallel plate capacitor having plate area A and separation between plates d as shown in figure. If dimensions of...
-
1. Liam Richardson is the business manager for the Smith & Lyngate Insurance agencies in the state of Maryland. Liam is interested in increasing the number of agents in Baltimore and plans to buy...
-
Bravo Luxury Company manufactures yachts and has two products: the Motor Yacht and the Sailing Yacht. Each Motor Yacht sells for $12,000,000, while the Sailing Yachts are only $10,000,000 each. To...
-
Niffy Corporation, a domestic C corporation, issued 100 shares of Code Sec. 1202 stock on November 1, 2013, to Jennifer. This was the first time it issued such stock. Jennifer sold the shares on...
-
Discuss the importance of organisational and national cultures in managing SHRM interventions;
-
As a senior HR manager in a major MNC, what arguments would you anticipate using to defend your company against the anti-globalisation lobbys position that globalisation was disadvantageous to your...
-
Explore the three main perspectives through which culture has been explored within organisations: integration, differentiation and fragmentation;
-
Terry Thompson, who meets all the requirements of Section 1237, sells five lots during 2017 at a gain of \(\$ 30,000\). During 2018 , he sells the sixth lot (basis \(\$ 5,000\) ) at a selling price...
-
Ultravision Inc. anticipates sales of $290,000 from January through April. Materials will represent 50 percent of sales, and because of level production, material purchases will be equal for each...
-
You deposit $10,000 in a savings account that earns 7.5% simple interest per year. What is the minimum number of years you must wait to double your balance? Suppose instead that you deposit the...
-
Factor out the greatest common factor. 6p 3 - 3p 2 - 9p 4
-
Write the first five terms of each arithmetic sequence. a 1 = 0.25, d = 0.55
-
Solve each equation. |x| = 14
-
Where does the management accounting function fit into an organizations structure?
-
What are the ethical responsibilities of management accountants?
-
Diana Corporation provides the following information for 2017: Calculate (a) Cost of goods manufactured in 2017 and (b) Cost of goods sold in 2017 Beginning work-in-process inventory, 1/1/2017 Total...
Study smarter with the SolutionInn App