help with 3 please, thank you.
fP FR EFIN 401 FALL 2018 PROBLEM SET #1 .5% 1. A S400,000 house mortgage was initially financed with 30 years of monthly payments at 6 interest. After 5 years (60 payments), market interest rates have decreased to 3.5% AR. You are considering refinancing the bal Refinancing charges amount to $2,500 and can be rolled into the refinancing plan. Find the new payment level assuming the refinancing charges are added to the amount financed with the new loan. ance of your mortgage over the remaining 25 years 2. Assume that you are the finance officer for an equipment dealer. The owner has asked you to determine the markup needed for the following financing packages. Assume that you need to net (today) $250,000 on a particular machine for the dealership to break even and that the companies required rate of return is 6%. AR. Allpayment plansare tomvolve monthly payments, Determine a common list price and rebate plan that will generate a $250,000 net to your company for each financing alternative. a. " No payments for 12 months, 36 month financing at a 2% AR." b. " 1% AR financing for 4 years (48 months). " c. " 3% AR financing with 24 monthly payments and no payments or interest for one year." 3. Suppose that an individual starts with a zero retirement savings balance and makes their initial payment one year from today. They wish to save a constant amount (at the end of each year) over the next 35 years to have an amount sufficient to purchase an expected fixed income retirement annuity of $60,000 per year (in today's purchasing power) for 30 years of possible retirement. During their savings years they can invest into one of two index funds. The first fund is a stock index with expected annual returns of 7.5% per year but with an expected annual volatility orU.20 over the next 35 years. The-seeend -fiund-is a bond index with expected annual returns of 5% and an expected volatility of 0.05 per year. Assume both the stock and bond indexes follow the standard log-normal stochastic diffusion process with a correlation of 0.5 in fP FR EFIN 401 FALL 2018 PROBLEM SET #1 .5% 1. A S400,000 house mortgage was initially financed with 30 years of monthly payments at 6 interest. After 5 years (60 payments), market interest rates have decreased to 3.5% AR. You are considering refinancing the bal Refinancing charges amount to $2,500 and can be rolled into the refinancing plan. Find the new payment level assuming the refinancing charges are added to the amount financed with the new loan. ance of your mortgage over the remaining 25 years 2. Assume that you are the finance officer for an equipment dealer. The owner has asked you to determine the markup needed for the following financing packages. Assume that you need to net (today) $250,000 on a particular machine for the dealership to break even and that the companies required rate of return is 6%. AR. Allpayment plansare tomvolve monthly payments, Determine a common list price and rebate plan that will generate a $250,000 net to your company for each financing alternative. a. " No payments for 12 months, 36 month financing at a 2% AR." b. " 1% AR financing for 4 years (48 months). " c. " 3% AR financing with 24 monthly payments and no payments or interest for one year." 3. Suppose that an individual starts with a zero retirement savings balance and makes their initial payment one year from today. They wish to save a constant amount (at the end of each year) over the next 35 years to have an amount sufficient to purchase an expected fixed income retirement annuity of $60,000 per year (in today's purchasing power) for 30 years of possible retirement. During their savings years they can invest into one of two index funds. The first fund is a stock index with expected annual returns of 7.5% per year but with an expected annual volatility orU.20 over the next 35 years. The-seeend -fiund-is a bond index with expected annual returns of 5% and an expected volatility of 0.05 per year. Assume both the stock and bond indexes follow the standard log-normal stochastic diffusion process with a correlation of 0.5 in
