8. A new office building was constructed 5 years ago by a consulting engineering firm. At that time the firm obtained the bank loan for P10,000,000 with a 20% annual interest rate, compounded quarterly. The terms of the loan called for equal quarterly payments for a 10-year period with the right of prepayment any time without penalty. Due to internal changes in the firm, it is now proposed to refinance the loan through an insurance company. The new loan is planned for a 20-year term with an interest rate of 24% per annum, compounded quarterly. The insurance company has a onetime service charge 5% of the balance. This new loan also calls for equal quarterly payments. a.) What is the balance due on the original mortgage (principal) if all payments have been made through a full five years? b.) What will be the difference between the equal quarterly payments in the existing arrangement and the revised proposal?

8. A new office building was constructed 5 years ago by a consulting engineering firm. At that time the firm obtained the bank loan for P10,000,000 with a 20% annual interest rate, compounded quarterly. The terms of the loan called for equal quarterly payments for a 10-year period with the right of prepayment any time without penalty. Due to internal changes in the firm, it is now proposed to refinance the loan through an insurance company. The new loan is planned for a 20-year term with an interest rate of 24% per annum, compounded quarterly. The insurance company has a onetime service charge 5% of the balance. This new loan also calls for equal quarterly payments. a.) What is the balance due on the original mortgage (principal) if all payments have been made through a full five years? b.) What will be the difference between the equal quarterly payments in the existing arrangement and the revised proposal?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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