A balloon payment is a loan where you pay small amounts of the loan first and...

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A balloon payment is a loan where you pay small amounts of the loan first and then, at the end of the loan, you pay a BIG portion of the acquired debt to liquidate it. Many times, in this type of loan, you pay the interest of the loan first and then, in the last installment, you pay the last part of the interest and the principal. Time left 0:45 You are contemplating the purchase of a company that has a $850,000 "balloon payment" on a 4-year remaining loan with 7% loan rate (i.e., paying only the interest years 1-3 and the last portion of the interest and the principal in Year 4). As part of you plan to purchase this company, you are contemplating paying off the loan today. You have secured a long-term debt with longer repayment provisions at a lower interes rate of 6.1%, that you can use right now to make the payments of the balloon payment loan. a) What immediate single payment (i.e., present dollars) would be a fair offer to pay all the series of payments for the balloon payment? =$ b) What if instead of a balloon payment loan, the company had an equivalent 4-year loan with uniform annual payments (using the same principal amount and loan rate for the 4-year term), then what immediate single payment would you need to pay off the loan? A balloon payment is a loan where you pay small amounts of the loan first and then, at the end of the loan, you pay a BIG portion of the acquired debt to liquidate it. Many times, in this type of loan, you pay the interest of the loan first and then, in the last installment, you pay the last part of the interest and the principal. Time left 0:45 You are contemplating the purchase of a company that has a $850,000 "balloon payment" on a 4-year remaining loan with 7% loan rate (i.e., paying only the interest years 1-3 and the last portion of the interest and the principal in Year 4). As part of you plan to purchase this company, you are contemplating paying off the loan today. You have secured a long-term debt with longer repayment provisions at a lower interes rate of 6.1%, that you can use right now to make the payments of the balloon payment loan. a) What immediate single payment (i.e., present dollars) would be a fair offer to pay all the series of payments for the balloon payment? =$ b) What if instead of a balloon payment loan, the company had an equivalent 4-year loan with uniform annual payments (using the same principal amount and loan rate for the 4-year term), then what immediate single payment would you need to pay off the loan?