is 12 percent. Prepare the journal entry to record the receipt of the note? I know PV of Principle is N=3 I/Y=12 FV=10,000 and PV=7.118.
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- Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of 50,000. First City has offered Hawley the alternatives listed here. Calculate the effective annual interest rate for each alternative. Which alternative has the lowest effective annual interest rate? a. A 12% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year b. A 9% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year c. An 8.75% annual rate on a discounted loan, with a 15% compensating balance d. Interest figured as 8% of the 50,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the yearCity Bank has made a 10-year, $2 million loan that pays annual interest of 10 percent per year. The principal is expected at maturity. (LG 24-2) a. What should it expect to receive from the sale of this loan if the current market rate on loans is 12 percent? b. The prices of loans of this risk are currently being quoted in the secondary market at bid-offer prices of 88-89 cents (on each dollar). Translate these quotes into actual prices for the above loan. c. Do these prices reflect a distressed or nondistressed loan? Explain.ABC Inc. asked your company for a 7-year loan of $50,000. The repayment of the loan will be as follows: ABC will pay $5,000 at the end of Year 1, $10,000 at the end of Year 2, and $15,000 at the end of Year 3, and fixed unspecified cash flow (assume X) at the end of each of the following years (Year 4 through Year 7). Assuming 8% as an appropriate rate of return on low risk but an illiquid 7-year loan. Find out the cash flow that this investment must provide at the end of each of the final 4 years (year 4 to year 7), that is, find out the X?
- Consider a sequential pay CMO that is backed by 60 mortgages with average balance of $100,000 each. The mortgages have monthly payments with WAM = 15 years and WAC = 4%. There is a servicing fee of 0.6% and prepayment is according to 100% PSA. There are two tranches in this CMO: tranch A issued for $3,000,000 and tranche B issued for $3,000,000. How much cash flow do investors in tranche A receive in the first month?Cerise Company would record a note payable of_____, if the terms of the loan with a bank are as follows: Cersie Company would have to make one $102,000 payment in two years. Assume the market interest rate is 10% per year and the company rounds to the nearest dollar. (The present value of $1 for two periods at 10% is 0.82645). a.) $94,498 b.) $84,298 c.) $10,200 d.) $74,098A corporate customer obtains a $2 million loan from a bank. The annual spread between the interest rate of this loan and the bank’s cost of fund is 6%, and this bank charges an annual fee of 2.8%. The expected probability of default of this borrower is 9.6%, and the loss given default is 30.7%. Calculate the expected return on this loan based on Moody’s analytics portfolio manager model. Round your answer up to 4 decimal places in decimal term, i.e., enter 0.1234 instead of 12.34%.
- Suppose you purchase a T-bills that is 125 days from maturity for $9,765. The T-bills has a face value of $10,000.a. Calculate the T-bills’s quoted discount rate. b. Calculate the T-bills’s annualized rate.c. Who are the major issuers of and investors in money market securities?A Financial Institution (FI) originates a pool of 500 30-year mortgages, each averaging $150,000 with an annual mortgage coupon rate of 8 percent. Assume that the entire mortgage portfolio is securitized to be sold as GNMA pass-throughs. The GNMA credit risk insurance fee is 6 basis points, and the FI's servicing fee is 19 basis points. Assume no prepayments. What are the expected monthly cash flows (fees) for the GNMA? $2,947.83 $4,527.72 $13,014.25 $3,123.42 $8,973.62You purchase a three-month discount security (e.g., a Treasury bill or commercial paper) for $0.9878 on $1 (i.e., $98,780 for $100,000 face amount). What are the discount yield, the simple annual yield, and the annual compound yield earned by the investment?
- Starr Co, has been approved for a $ 100,000 loan commitment from its local bank. The bank has offered the following term =one year, up front fee =75 basis point, back end fee =25 basis points , and rate on the loan =8.00 percent. Starr expects to immediately take down $80,000 and no more during the year unless there is some unforeseen need. What is the total interest and fees Starr can expect to pay this loan commitment?Are the following assets rate-sensitive within a six-month time frame? Provide an explanation for each. a) Fed Funds sold (daily repricing) b) Two-year Treasury bond with semiannual coupon payments c) 4-year fully amortized car loan with $350 monthly payments including both principal and interest (for the first six months, principal payments total $448) d) Commercial loan priced at the bank's prime rate plus 2%Honesty Company is exploring to issue a financial instrument next year. They are researching for a reasonable interest rate to offer. The financial instrument is expected to cover for 180 days. Government Treasury Bills are being offered with the following rates: 30 day – 1.5%; 60 day – 2%; 90 day – 2%; 180 day – 2.50%; and 360 day – 3%. Inflation was reported at 1.2%. Honesty must be able to safeguard at least 3% of the risk for this issuance.What is the appropriate interest rate (round off your answer to two decimal places)?
