A new office building was constructed 5 years ago by a consulting engineering firm. At the time the firm obtained the bank loan for ₱10,000,000 with a 20% annual interest rate, compounded quarterly. The terms of the loan called for equal quarterly payments for 10-year period with the right of prepayment at any time without penalty. Due to the 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 one-time service charge of 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 through a full five years? (b) What will be the difference between the equal quarterly payments in the existing arrangement and the revised proposal? (c) cash flow diagram
A new office building was constructed 5 years ago by a consulting engineering firm.
At the time the firm obtained the bank loan for ₱10,000,000 with a 20% annual interest
rate, compounded quarterly. The terms of the loan called for equal quarterly
payments for 10-year period with the right of prepayment at any time without penalty.
Due to the 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 one-time service charge of 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 through a full five years?
(b) What will be the difference between the equal quarterly payments in the existing
arrangement and the revised proposal?
(c) cash flow diagram
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