All work must be shown and no intermediate rounding (7 decimals). PVIFA formula must be shown. Option
Question:
All work must be shown and no intermediate rounding (7 decimals). PVIFA formula must be shown.
Option 1: First Mortgage loan for $170,000 with an effective interest cost of 9%.
Option 2: First Mortgage loan for $150,000 with terms: 6%, 30 years &
Second Mortgage loan for $20,000 with terms: 12% 10 years.
The holding period is 5 years (note: The procedure varies slightly with the holding period selection). Mathematically demonstrate using PV analysis which option should be selected. Indicate whether option 1 or 2 should be taken.
A. Calculate Monthly Payments and Loan Balances for Option 2.
B. Do Present Value Analysis
C. Decision: Which Option should be selected and reason for the selections.
Accounting What the Numbers Mean
ISBN: 978-0073527062
9th Edition
Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele,