The buyer of a piece of real estate is often given the option of buying down the loan. This option gives the buyer a choice of loan terms in which various combinations of interest rates and discount points are offered. The choice of how many points and what rate is optimal is often a matter of how long the buyer intends to keep the property.Darrell Frye is planning to buy an office building at a cost of $983,000. He must pay 10% down and has a choice of financing terms. He can select from a 9% 30-year loan and pay 4 discount points, a 9.25% 30-year loan and pay 3 discount points, or a 9.5% 30-year loan and pay 2 discount points. Darrell expects to hold the building for four years and then sell it. Except for the three rate and discount point combinations, all other costs of purchasing and selling are fixed and identical. (Round your answers to the nearest cent. Use this table, if necessary.) *table attached*(d): If Darrell chooses the 2-point 9.5% loan, what will be his total outlay in points and payments after 48 months?$_______ e): Of the three choices for a loan, which results in the lowest total outlay for Darrell after 48 months?a): the 4-point 9% loanb): the 3-point 9.25% loan c): the 2-point 9.5% loan Table 14-1: Monthly Payments to Amortize Principal and Interest per $1,000 FinancedMonthly Payments(Necessary to amortize a loan of $1,000)Interest10152025303540Rate (%)YearsYearsYearsYearsYearsYearsYearsYears3.873.5018.199.897.155.805.014.494.134.034.183.7518.3018.4218.5310.0110.1210.247.277.407.527.655.935.144.634.284.774.924.006.065.284.434.256.195.424.584.344.504.755.0018.6410.366.335.565.074.734.5018.7610.487.786.465.705.224.894.6618.8710.617.916.605.855.375.054.828.048.178.305.2518.9910.736.745.995.525.214.995.505.7519.1010.856.886.145.685.375.1619.2210.987.026.296.445.845.545.336.0019.3311.108.447.166.005.706.256.505.505.685.8519.4511.238.577.316.606.165.8719.5719.6811.358.717.466.756.917.076.326.046.496.656.7511.4811.6111.748.857.66.216.037.0019.808.997.756.396.2119.929.139.276.406.586.776.957.147.257.907.236.826.568.067.397.557.5020.0411.876.996.747.7520.167.1612.0012.1312.279.418.216.928.0020.289.568.367.727.347.108.2520.409.709.859.998.527.887.517.288.5020.5212.408.688.848.057.697.477.337.527.717.918.7520.6412.538.227.877.659.009.259.509.7520.7612.6710.149.008.398.057.8420.8812.8012.9410.2910.449.168.568.238.418.0321.009.328.748.228.1021.1213.0810.599.498.918.598.418.3010.0021.2513.2210.759.659.098.788.608.4913.3513.4910.2521.3710.909.829.268.969.158.798.6921.4921.6210.5011.059.989.448.988.8913.6313.7810.7511.2110.159.629.339.189.0811.0021.7411.3710.329.809.529.379.2821.8711.5211.6810.499.569.7611.2513.929.989.719.4811.5021.9914.0610.6610.169.909.6811.8412.0012.1611.7522.1214.2010.8410.3510.099.969.8822.2412.0012.2510.0810.2914.3511.0110.5310.7210.2910.1622.3714.4911.1910.4810.3512.5022.5014.6412.3311.3610.910.6710.5510.4912.7522.6314.7812.4912.6511.5411.7211.0910.8710.7510.6913.0022.7514.9311.2811.0610.9510.90

Step 1: Calculate the monthly payments as follows: Therefore, the monthly payments are $7,440.…

The buyer of a piece of real estate is often given the option of buying down the loan. This option gives the buyer a choice of loan terms in which various combinations of interest rates and discount points are offered. The choice of how many points and what rate is optimal is often a matter of how long the buyer intends to keep the property. Darrell Frye is planning to buy an office building at a cost of $983,000. He must pay 10% down and has a choice of financing terms. He can select from a 9% 30-year loan and pay 4 discount points, a 9.25% 30-year loan and pay 3 discount points, or a 9.5% 30-year loan and pay 2 discount points. Darrell expects to hold the building for four years and then sell it. Except for the three rate and discount point combinations, all other costs of purchasing and selling are fixed and identical. (Round your answers to the nearest cent. Use this table, if necessary.) table attached (d): If Darrell chooses the 2-point 9.5% loan, what will be his total outlay in points and payments after 48 months? $_______ e): Of the three choices for a loan, which results in the lowest total outlay for Darrell after 48 months? a): the 4-point 9% loan b): the 3-point 9.25% loan c): the 2-point 9.5% loan

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter12: Current Liabilities

Section: Chapter Questions

Problem 16Q: Jain Enterprises honors a short-term note payable. Principal on the note is $425,000, with an annual...

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The buyer of a piece of real estate is often given the option of buying down the loan. This option gives the buyer a choice of loan terms in which various combinations of interest rates and discount points are offered. The choice of how many points and what rate is optimal is often a matter of how long the buyer intends to keep the property.

Darrell Frye is planning to buy an office building at a cost of $983,000. He must pay 10% down and has a choice of financing terms. He can select from a 9% 30-year loan and pay 4 discount points, a 9.25% 30-year loan and pay 3 discount points, or a 9.5% 30-year loan and pay 2 discount points. Darrell expects to hold the building for four years and then sell it. Except for the three rate and discount point combinations, all other costs of purchasing and selling are fixed and identical. (Round your answers to the nearest cent. Use this table, if necessary.)

*table attached*

(d): If Darrell chooses the 2-point 9.5% loan, what will be his total outlay in points and payments after 48 months?

$_______

e): Of the three choices for a loan, which results in the lowest total outlay for Darrell after 48 months?

a): the 4-point 9% loan

b): the 3-point 9.25% loan

c): the 2-point 9.5% loan

Table 14-1: Monthly Payments to Amortize Principal and Interest per $1,000 Financed
Monthly Payments
(Necessary to amortize a loan of $1,000)
Interest
10
15
20
25
30
35
40
Rate (%)
Years
Years
Years
Years
Years
Years
Years
Years
3.87
3.50
18.19
9.89
7.15
5.80
5.01
4.49
4.13
4.03
4.18
3.75
18.30
18.42
18.53
10.01
10.12
10.24
7.27
7.40
7.52
7.65
5.93
5.14
4.63
4.28
4.77
4.92
4.00
6.06
5.28
4.43
4.25
6.19
5.42
4.58
4.34
4.50
4.75
5.00
18.64
10.36
6.33
5.56
5.07
4.73
4.50
18.76
10.48
7.78
6.46
5.70
5.22
4.89
4.66
18.87
10.61
7.91
6.60
5.85
5.37
5.05
4.82
8.04
8.17
8.30
5.25
18.99
10.73
6.74
5.99
5.52
5.21
4.99
5.50
5.75
19.10
10.85
6.88
6.14
5.68
5.37
5.16
19.22
10.98
7.02
6.29
6.44
5.84
5.54
5.33
6.00
19.33
11.10
8.44
7.16
6.00
5.70
6.25
6.50
5.50
5.68
5.85
19.45
11.23
8.57
7.31
6.60
6.16
5.87
19.57
19.68
11.35
8.71
7.46
6.75
6.91
7.07
6.32
6.04
6.49
6.65
6.75
11.48
11.61
11.74
8.85
7.6
6.21
6.03
7.00
19.80
8.99
7.75
6.39
6.21
19.92
9.13
9.27
6.40
6.58
6.77
6.95
7.14
7.25
7.90
7.23
6.82
6.56
8.06
7.39
7.55
7.50
20.04
11.87
6.99
6.74
7.75
20.16
7.16
12.00
12.13
12.27
9.41
8.21
6.92
8.00
20.28
9.56
8.36
7.72
7.34
7.10
8.25
20.40
9.70
9.85
9.99
8.52
7.88
7.51
7.28
8.50
20.52
12.40
8.68
8.84
8.05
7.69
7.47
7.33
7.52
7.71
7.91
8.75
20.64
12.53
8.22
7.87
7.65
9.00
9.25
9.50
9.75
20.76
12.67
10.14
9.00
8.39
8.05
7.84
20.88
12.80
12.94
10.29
10.44
9.16
8.56
8.23
8.41
8.03
21.00
9.32
8.74
8.22
8.10
21.12
13.08
10.59
9.49
8.91
8.59
8.41
8.30
10.00
21.25
13.22
10.75
9.65
9.09
8.78
8.60
8.49
13.35
13.49
10.25
21.37
10.90
9.82
9.26
8.96
9.15
8.79
8.69
21.49
21.62
10.50
11.05
9.98
9.44
8.98
8.89
13.63
13.78
10.75
11.21
10.15
9.62
9.33
9.18
9.08
11.00
21.74
11.37
10.32
9.80
9.52
9.37
9.28
21.87
11.52
11.68
10.49
9.56
9.76
11.25
13.92
9.98
9.71
9.48
11.50
21.99
14.06
10.66
10.16
9.90
9.68
11.84
12.00
12.16
11.75
22.12
14.20
10.84
10.35
10.09
9.96
9.88
22.24
12.00
12.25
10.08
10.29
14.35
11.01
10.53
10.72
10.29
10.16
22.37
14.49
11.19
10.48
10.35
12.50
22.50
14.64
12.33
11.36
10.9
10.67
10.55
10.49
12.75
22.63
14.78
12.49
12.65
11.54
11.72
11.09
10.87
10.75
10.69
13.00
22.75
14.93
11.28
11.06
10.95
10.90

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