Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please show work on how to get answer [Problems 3 to 5 are in continuation]. Problem#3 (40 points): You are given the following balance sheet
Please show work on how to get answer
[Problems 3 to 5 are in continuation]. Problem#3 (40 points): You are given the following balance sheet values of an hypothetical bank att 0. $200 Asset One-year commercial loan at 12% interest, principal amount to be repaid in four equal payments of $50, at the end of each quarter Liability + Equity One-year CD at 12% interest, balloon payment $200 Equity $0 a) Scenario 1: What will be the net cash flow at the end of year 1 (end of quarter 4) if all the intermittent cash flows from the loan are reinvested at the reinvestment rate equal to 12.5509% per annum, compounded annually (which is equivalent to 12% per annum, compounded quarterly, check it)? For full credit, check your answer using both 12.5509% per annum, compounded annually, and 12% per annum, compounded quarterly. [Answer: $1.101762] b) Scenario 2: What will be the net cash flow at the end of year 1 (end of quarter 4) if all the intermittent cash flows from the loan are reinvested at the reinvestment rate equal to 10% per annum, compounded quarterly? [Answer: ($0.61006), loss of $0.61006) c) Scenario 3: What will be the net cash flow at the end of year I (end of quarter 4) if all the intermittent cash flows from the loan are reinvested at the reinvestment rate equal to 14.7523% per annum, compounded annually? [Answer: S2.82496] Non-graded question: What was the learning outcome from this problem? [Problems 3 to 5 are in continuation]. Problem#3 (40 points): You are given the following balance sheet values of an hypothetical bank att 0. $200 Asset One-year commercial loan at 12% interest, principal amount to be repaid in four equal payments of $50, at the end of each quarter Liability + Equity One-year CD at 12% interest, balloon payment $200 Equity $0 a) Scenario 1: What will be the net cash flow at the end of year 1 (end of quarter 4) if all the intermittent cash flows from the loan are reinvested at the reinvestment rate equal to 12.5509% per annum, compounded annually (which is equivalent to 12% per annum, compounded quarterly, check it)? For full credit, check your answer using both 12.5509% per annum, compounded annually, and 12% per annum, compounded quarterly. [Answer: $1.101762] b) Scenario 2: What will be the net cash flow at the end of year 1 (end of quarter 4) if all the intermittent cash flows from the loan are reinvested at the reinvestment rate equal to 10% per annum, compounded quarterly? [Answer: ($0.61006), loss of $0.61006) c) Scenario 3: What will be the net cash flow at the end of year I (end of quarter 4) if all the intermittent cash flows from the loan are reinvested at the reinvestment rate equal to 14.7523% per annum, compounded annually? [Answer: S2.82496] Non-graded question: What was the learning outcome from thisStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started