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CHAPTER CASE S&S AIR'S MORTGAGE k S d Todd Story, th f S&S Air. ed by th k Chris had d financial planning. Using Chr analy king the d d fo aft, they have decided that th ting fabricati manufacturing facility. Mark and Todd have identified a suitable structur that is currently for sale. and th equipment is sufficient, but it is time igger beli e they can buy and refurbish it for about $3 Mark, Todd. to acquire Chr th Christie Vaugh for F d National Bank. Th ailab facility. eting ortgage opti Christie begins the eting by di g a 30-y ortgage. Th uld be repaid. equal if the pr elati hip betw S&S Air d the bank, th uld b for th Christi that the APR of th uld be 6.1 per Todd asks if hort ailab Christi that the bank d 20-y ailab APR. ortgag ortgage Mark decid k Christie abo he di ortgage broke g his h Every two weeks a mortgage payment is made that is exactly one-half of the traditional monthly mortgage payment Christie informs him that the bank d the company since it saves interest payments the APR of the traditional loan. Mark nods his head. He then stat is is the best mortgage option available t The APR of the uld be th Christi th Mark, but th bullet ball uld the gr gs. At Todd's pr pting, she ge plain a bullet Th thly pay bullet uld be calculated pay using a 30-year traditional mortgage. In this case, there would be a 5-y bullet. Thi uld that th uld make the for the traditional 30-y ortgage for the fi diately after th ortgage pay the 60th the bullet payment is calculated. Christie tells him that the remaining principal can be calculated using akes payment, the bullet payment would be due. The bullet payment is the remaining principal of th Chris then asks ho an amortization table, but it is also the present value of the remaining 2 years of mortgage payments for the 30-year mortgage Todd has also h d of d asks if thi ailab d what th uld be. Christi that the bank off f 1 0 y APR of 5 percent. She goes on to further explain the uld repay the $35 milli Th uld b ponsibl aking red. No pr pal pay quired. At the d of the 10-y pany pay on a traditional mortgage. Principal payments would reduce the principal of the loan and reduce the interest due on the next payment make principal payments at any time. The principal payments would work like th Mark d Todd. tisfied. th Christi but they f which they should ch They ha ked Chr the f help th ortgag g q QUESTIONS l. What are the monthly payments for 30-year traditional mortgage What are the payments fo 20-year traditional mortgage 2. Prepar table for the fir ths of the traditional 30-y ortgage. H ch of the first pay d principal ortizati 3. H uld it take for S&S Air ff th g 30-y traditional mortgage pay Why this shorter than the tim ded ff the traditional mortgage? H uld th pay 4. As S&S Air take bullet der th bed. What the pay 5. What are the payments for the interest-only loan 6. Which mortgage the best for th pany? Are the y potential this acti