You have just purchased a new house and taken a mortgage for $100,000. The interest rate is
Question:
You have just purchased a new house and taken a mortgage for $100,000. The interest rate is 12% compounded monthly and you will make payments for 25 years.
a) Find the size of the monthly payment.
b) The bank has a policy of rounding the payments up to the next cent. Find the new monthly payment and compute a new n.
c) What was the balance of the loan after three periods?
d) How much of your third payment was Principal? Interest?
e) How much did you pay in the first year?
f) How much of that was principal?
g) How much of that was interest?
h) What was the balance of the loan at the end of the first year?
i) How much interest did you pay in the third year?
j) Assuming the mortgage stays at the same rate until maturity find the size of your last payment.
2. Trump Corporation 20 year bonds have a coupon rate of j2 = 6% and mature in 20 years. Find the price of the bond if they are priced to yield j2 = 7.2%.
3. You have decided to start a new magazine. Minum will be targeted at sensitive guys and will have regular articles on abstinence, temperance and cultural events such as opera and the symphony. You estimate your magazine will cost $510,074.04 in start-up costs. Annual expenses are expected to be $125,000 and subscription and advertising revenue is expected to total $200,000 for each of the first two years and $300,000 in each of the following three years after which time you will sell your magazine for $400,000. Your MARR is 15% (remember, all cash outflows including annual expenses occur at the beginning of the year and inflows at the end of the year)
a) Should you invest? What is the NPV?
b) You are worried that interest rates may rise what is the maximum rate that would still make this an acceptable project?
c) Your accountant has told you your selling price is too optimistic, what is the minimum selling price that would make this a worthwhile investment?
d) How much could your start up costs increase by and still make this a worthwhile investment?
e) Right after paying the start-up costs and first years expenses you decided to sell - how much money should you ask for?
f) You have decided that the consumption of beer is not an appropriate activity for men and will not accept beer ads - what is the maximum annual decrease in revenue that would still make this a worthwhile investment?
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill