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2 Better Late Than Never You work for a bank. Exactly five years ago, you helped Al Kapon, a well-known local businessperson, to get a $15,000,000, 20-year variable-payment amortizing loan in order to build a soft drink bottling facility. The loan carries an interest of 7% per annum, has monthly payments, and is structured like similar loans discussed in class; in particular, Kapon is expected to pay down the same amount of principal every month for the duration of the loan, in addition to the interest due monthly. 2.1. What is the payment due at the end of the very first month of this loan? 2.2. On the fifth anniversary of the loan Kapon comes to your office unexpectedly, and states that his business is in trouble. However, he hopes that difficulties are temporary, and that his business and finances will recover within one year. After some back and forth, you agree on behalf of the bank to forsake principal payments due for the next 12 months. However, Kapon still must pay in full the interest due at the end of each month. (a) What is the loan balance at the end of 5 years, when Kapon asks for the modification of the loan? (b) What payments will be made at the end of each month for the duration of the year when principal payments are suspended? 2.3. Principal repayments resume after the 12 months elapse. For the remainder of the loan's original term, the same amount of principal will be repaid every month, so that by the loan's original maturity date the principal is fully paid off. (a) What will be the monthly principal payments due after the end of the principal repayment suspension? (b) Provide the row of the loan's updated amortization table corresponding to the first month in which after principal payments have resumed. 2 Better Late Than Never You work for a bank. Exactly five years ago, you helped Al Kapon, a well-known local businessperson, to get a $15,000,000, 20-year variable-payment amortizing loan in order to build a soft drink bottling facility. The loan carries an interest of 7% per annum, has monthly payments, and is structured like similar loans discussed in class; in particular, Kapon is expected to pay down the same amount of principal every month for the duration of the loan, in addition to the interest due monthly. 2.1. What is the payment due at the end of the very first month of this loan? 2.2. On the fifth anniversary of the loan Kapon comes to your office unexpectedly, and states that his business is in trouble. However, he hopes that difficulties are temporary, and that his business and finances will recover within one year. After some back and forth, you agree on behalf of the bank to forsake principal payments due for the next 12 months. However, Kapon still must pay in full the interest due at the end of each month. (a) What is the loan balance at the end of 5 years, when Kapon asks for the modification of the loan? (b) What payments will be made at the end of each month for the duration of the year when principal payments are suspended? 2.3. Principal repayments resume after the 12 months elapse. For the remainder of the loan's original term, the same amount of principal will be repaid every month, so that by the loan's original maturity date the principal is fully paid off. (a) What will be the monthly principal payments due after the end of the principal repayment suspension? (b) Provide the row of the loan's updated amortization table corresponding to the first month in which after principal payments have resumed
