Evaluate the financing package described below based on a purchase price of $500,000. (Note: All loan fees
Question:
Evaluate the financing package described below based on a purchase price of $500,000. (Note: All loan fees are paid separately and not added to the financed portion.)
Cost of funds: 7.5% (interest rate)
Amortization period: Interest only
Amount of funds borrowed: 90% loan to value
Loan duration: 10 years (after which balloon will be due)
Loan origination fees: 1% plus mortgage fees of 3%
Calculate (round all answers in parts 'a-d' to the nearest dollar):
Loan amount
Loan fees
Monthly payment amount
Balloon payment at the end of the loan duration (if any)
Indicate whether the particular financing package would be better suited to a short-term holding period, intermediate holding period, or long-term holding period.
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Advanced Financial Accounting
ISBN: 978-0137030385
6th edition
Authors: Thomas Beechy, Umashanker Trivedi, Kenneth MacAulay