Question
(1) A borrower finds that the incremental cost of borrowing an extra $10,000 is 14%. If the borrower can earn 12% on alternative investments of
(1) A borrower finds that the incremental cost of borrowing an extra $10,000 is 14%. If the borrower can earn 12% on alternative investments of comparable risk should he borrow the extra $10,000 at 14%?
(2) What is the amount to principle reduction for the 180th payment?
Payment Opening Monthly Month's Balance Payment 1 $475,000 $3,055.62 Interest $2,640.21 Principal Closing Reduction Balance $415.41 $474,584.57 2 $3,055.62 --- 50 --- 180 360 --- --- --- - $3,055.62 $3,055.62 $3,055.62 --- --- --- --- --- ? --- --- $0
Step by Step Solution
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Step: 1
1 No the borrower should not borrow the extra 10000 at 14 if they can only earn 12 on alternativ...
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Smith and Roberson Business Law
Authors: Richard A. Mann, Barry S. Roberts
15th Edition
1285141903, 1285141903, 9781285141909, 978-0538473637
