What are the key differences between leasing and borrowing assuming that the loan agreement calls for a principal reduction of RM8,400 every year instead of equal annual payments.
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What are the key differences between leasing and borrowing assuming that the loan agreement calls for a principal reduction of RM8,400 every year instead of equal annual payments.
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- An institutional lender is willing to make a loan for $1 million on an office building at a 6 percent interest (accrual) rate with payments calculated using an 4 percent pay rate and a 30-year loan term. (That is, payments are calculated as if the interest rate were 4% with monthly payments over 30 years.) After the first five years the payments are to be adjusted so that the loan can be amortized over the remaining 25-year term. Required: a. What is the initial payment? b. How much interest will accrue during the first year? c. What will the balance be after five years? d. What will the monthly payments be starting in year 6?An institutional lender is willing to make a loan for $1 million on an office building at a 10 percent interest (accrual) rate with payments calculated using an 8 percent pay rate and a 30-year loan term. (That is, payments are calculated as if the interest rate were 8 percent with monthly payments over 30 years.) After the first five years the payments are to be adjusted sothat the loan can be amortized over the remaining 25-year term.a. What is the initial payment?b. How much interest will accrue during the first year?c. What will the balance be after five years?d. What will the monthly payments be starting in year 6?A loan association requires that loans be repaid by uniform monthly payments which includes monthly interest calculated on the basis of nominal 5.4% per annum. If Php 5000 is borrowed to be repaid in 10 years, what must be the monthly payment? a. Php 79.12 b. Php 65.31 c. Php 86.55 d. Php 54.02
- Mississippi Company borrows ¥80,000,000 at a time when the exchange rate is 110 ¥/$. Principal is to be repaid two years from now, and interest is for the yen bond is 4% per annum, paid annually in yen. Suppose the yen is expected to depreciate relative to the dollar to 120 ¥/$ in one year, and 125¥/$ in two years. Under these circumstances, what would be the effective dollar cost of this loan for Mississippi Company? Please enter your answer as % -- e.g. if your answer is 2.34% type in 2.34.SportZ has negotiated a loan of $25 000 with interest at 7.6% per annum, to be paid as month-end payments of $2200.00 over the next year. Construct a loan amortization schedule to answer the following questions. i. How much interest is paid over the first two months? ii. How much of the principal is paid by the end of the first two months? iti. How much interest is paid over the term of the loan? iv. What is the amount of the final payment?]ABC Bank sanctions a loan application for a 25 year mortage loan for US100,000. The interest rate on the loan is 12% per annum and the borrower is required to make equal monthly payments to repay the loan in 25 years. If the market interest rate goes down to 10% per annum, what will the loan be worth?
- Singapore Post has approached a bank to take out a mortgage loan purchase a new warehouse. The bank is willing to provide them with a 10-year loan of $400,000 at an interest rate of 12% per annum, compounding monthly. Singapore Post will be required to make monthly repayments on the loan. Calculate the monthly loan instalment that will be paid on the loan. Assume that Singapore Post instead negotiates to make annual repayments on the loan. What is the annual effective interest rate on the current loan terms? Singapore Airlines has 8% $100,000 debentures outstanding in the corporate bond market, with exactly 8 years left until maturity. The bonds pays coupon half yearly. Calculate the price of the corporate bond to yield an investor 6% per annum, compounding half yearly.A $200,000 loan amortized over 14 years at an interest rate of 10% per year requires payments of $21,215.85 to completely remove the loan when interest is charged on the unrecovered balance of the principal. If interest is charged on the original principal instead of the unrecovered balance, what is the loan balance after 14 years provided the same $21,215.85 payments are made each year?A monthly amortizing, $ 100,000 fixed-rate loan amortizes fully in 30 years and has a contract rate of 6%. Total initial friction costs equal $ 6,000 What is the monthly payment? The loan is pre-paid after 4 years. What is the loan balance? What is the EBC, if no pre-payment penalties are applied?
- ABC is inclined to take a bank loan that has a face amount of P5,000,000, a term of 6 months, interest of 10%, and required compensating balance of P700,000. Compute for the following: 1. How much is the simple effective annual interest of the loan? 2. Should ABC accept this loan if another loan has similar terms but has a simple effective cost of 11%?A bank is considering using a “three against six” $2,000,000 FRA to cover its potential loss. The purpose of the FRA is to cover the interest rate risk caused by the maturity mismatch from having made a six-month Eurodollar loan and having accepted a three-month Eurodollar deposit. The agreement rate with the buyer is 4.6%. There are actually 92 days in the three-month FRA period. Assume 360 days a year, which one of the following statements is incorrect? Group of answer choices To hedge the risk caused by maturity mismatch, the bank could take the buyer’s position if it uses the Euro-Dollar Interest Rate Futures instead. If the settlement rate is 4.8% three months from today, then the buyer pays the seller. If the settlement rate is 4.8% three months from today, then the FRA is worth $1009.84 To hedge the loss caused by maturity mismatch, the bank should be a seller of the FRA. Without the FRA, the bank will lose if the market interest rate…Cumberland Furniture wishes to establish a prearranged borrowing agreement with its local commercial bank. The bank’s terms for a line of credit are 3.30% over the prime rate, and each year the borrowing must be reduced to zero for a 30-day period. For an equivalentrevolving credit agreement, the rate is 2.80% over prime with a commitment feeof 0.50% on the average unused balance. With both loans, the required compensating balance is equal to 20% of the amount borrowed. The prime rate is currently 8%. Both agreements have $4 million borrowing limits. The firm expects on average to borrow $2 million during the year no matter which loan agreement it decides to use. What is the effective annual rate under the line of credit? b. What is the effective annual rate under the revolving credit agreement? (Hint: Compute the ratio of the dollars that the firm will pay in interest and commitment fees to the dollars that the firm will effectively have used of.) If the firm does expect to borrow…