Question: Please show work on how to get answer [Problems 3 to 5 are in continuation]. Problem#3 (40 points): You are given the following balance sheet

 Please show work on how to get answer [Problems 3 to

Please show work on how to get answer

[Problems 3 to 5 are in continuation]. Problem#3 (40 points): You are given the following balance sheet values of an hypothetical bank att 0. $200 Asset One-year commercial loan at 12% interest, principal amount to be repaid in four equal payments of $50, at the end of each quarter Liability + Equity One-year CD at 12% interest, balloon payment $200 Equity $0 a) Scenario 1: What will be the net cash flow at the end of year 1 (end of quarter 4) if all the intermittent cash flows from the loan are reinvested at the reinvestment rate equal to 12.5509% per annum, compounded annually (which is equivalent to 12% per annum, compounded quarterly, check it)? For full credit, check your answer using both 12.5509% per annum, compounded annually, and 12% per annum, compounded quarterly. [Answer: $1.101762] b) Scenario 2: What will be the net cash flow at the end of year 1 (end of quarter 4) if all the intermittent cash flows from the loan are reinvested at the reinvestment rate equal to 10% per annum, compounded quarterly? [Answer: ($0.61006), loss of $0.61006) c) Scenario 3: What will be the net cash flow at the end of year I (end of quarter 4) if all the intermittent cash flows from the loan are reinvested at the reinvestment rate equal to 14.7523% per annum, compounded annually? [Answer: S2.82496] Non-graded question: What was the learning outcome from this problem? [Problems 3 to 5 are in continuation]. Problem#3 (40 points): You are given the following balance sheet values of an hypothetical bank att 0. $200 Asset One-year commercial loan at 12% interest, principal amount to be repaid in four equal payments of $50, at the end of each quarter Liability + Equity One-year CD at 12% interest, balloon payment $200 Equity $0 a) Scenario 1: What will be the net cash flow at the end of year 1 (end of quarter 4) if all the intermittent cash flows from the loan are reinvested at the reinvestment rate equal to 12.5509% per annum, compounded annually (which is equivalent to 12% per annum, compounded quarterly, check it)? For full credit, check your answer using both 12.5509% per annum, compounded annually, and 12% per annum, compounded quarterly. [Answer: $1.101762] b) Scenario 2: What will be the net cash flow at the end of year 1 (end of quarter 4) if all the intermittent cash flows from the loan are reinvested at the reinvestment rate equal to 10% per annum, compounded quarterly? [Answer: ($0.61006), loss of $0.61006) c) Scenario 3: What will be the net cash flow at the end of year I (end of quarter 4) if all the intermittent cash flows from the loan are reinvested at the reinvestment rate equal to 14.7523% per annum, compounded annually? [Answer: S2.82496] Non-graded question: What was the learning outcome from this

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!