Question
The management of your firm decided to purchase a plot of land. In order to finance this purchase, the firm needs to borrow $1,520,000 from
The management of your firm decided to purchase a plot of land. In order to finance this purchase, the firm needs to borrow $1,520,000 from the bank. The mortgage has an APR of 5.2 percent, and it requires monthly payments over the next 25 years. As the CFO of this firm, after conducting your budget analysis, you decide that smaller monthly installments are preferable. Therefore, you select the loan option that has an eight-year balloon payment. Answer the questions that follow:
a. How much will you pay per month for the first 8 years? (5 points)
b. How big will the balloon payment be? (6 points)
c. Assume that instead of the balloon payment option above, you decide to select the other option where the loan will be fully amortized over 25 years with monthly payments. Prepare the amortization table for the first 2 months by filling out the table below: (14 points)
Month | Loan Value | Total Monthly Payment | Interest Payment | Principal Payment | Ending Balance | |
1 |
|
|
|
|
| |
2 |
|
|
|
|
|
Step 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