You are an important local real estate investor; you just got a $10,000,000 balloon loan to...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You are an important local real estate investor; you just got a $10,000,000 balloon loan to buy a new office building in your home town. The nominal maturity of the loan is 30 years, but the loan has a 10-year balloon payment. In other words, the loan will end at the end of the 10th year, and the outstanding balance will be paid off in a lump sum at that time. The interest on the loan is 6.7% per annum, compounded monthly. 4.1. Assume that the loan has fixed payments. (a) What is the monthly fixed payment that you have to make? (b) Let PV be the present value at time 0 of the fixed payments made over the 10-year life of the loan. What is PV? (c) Can you find a connection between the $10,000,000 principal, PV, and the balloon payment at the end of year 10? Compute, using this connection, the size of the balloon payment at the end of year 10. If you cannot find the connection, a more work-intensive approach is to use an amortization table to compute the answer (use Excel!). 4.2. Assume now that this loan has variable payments. At the end of each month fixed, equal portions of the loan's principal are paid down, such that the principal would be fully amortized at the end of the hypothetical 30-year loan period. What is the size of the balloon payment at the end of year 10 in this case? Go to Settings to activate Wir You are an important local real estate investor; you just got a $10,000,000 balloon loan to buy a new office building in your home town. The nominal maturity of the loan is 30 years, but the loan has a 10-year balloon payment. In other words, the loan will end at the end of the 10th year, and the outstanding balance will be paid off in a lump sum at that time. The interest on the loan is 6.7% per annum, compounded monthly. 4.1. Assume that the loan has fixed payments. (a) What is the monthly fixed payment that you have to make? (b) Let PV be the present value at time 0 of the fixed payments made over the 10-year life of the loan. What is PV? (c) Can you find a connection between the $10,000,000 principal, PV, and the balloon payment at the end of year 10? Compute, using this connection, the size of the balloon payment at the end of year 10. If you cannot find the connection, a more work-intensive approach is to use an amortization table to compute the answer (use Excel!). 4.2. Assume now that this loan has variable payments. At the end of each month fixed, equal portions of the loan's principal are paid down, such that the principal would be fully amortized at the end of the hypothetical 30-year loan period. What is the size of the balloon payment at the end of year 10 in this case? Go to Settings to activate Wir
Expert Answer:
Related Book For
Canadian Income Taxation Planning And Decision Making
ISBN: 9781259094330
17th Edition 2014-2015 Version
Authors: Joan Kitunen, William Buckwold
Posted Date:
Students also viewed these finance questions
-
Which of the following properties would likely result in a porous rock on the basis of the results of Experiment 2? Experiment 2 Geologists in Arizona were interested in the porosities of different...
-
(a)A cut-off score of 85 has been established for a sample of scores in which the mean is 65. If the corresponding z-score is 2.5 and the scores are normally distributed, what is the standard...
-
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
-
This histogram shows the times, in minutes, required for 25 rats in an animal behavior experiment to successfully navigate a maze. Which of the following best describes the shape of the histogram? A....
-
Steam at 2,000 kPa containing 6% moisture is heated at constant pressure to 575oC. How much heat is required per kilogram?
-
Lopez Company issues 10,000 restricted shares to its CFO, Juan Carlos, on January 1, 2015. The shares have a fair value of 500,000 on this date. The service period related to the restricted shares is...
-
Determine the exact values of a. \(\sin \left(\cos ^{-1} \frac{3}{5} ight)\). b. \(\tan \left(\sin ^{-1} \frac{x}{7} ight)\). c. \(\sin ^{-1}\left(\sin \frac{3 \pi}{2} ight)\).
-
Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net...
-
TOPIC: Audit of Inventory Using the average method, the equivalent units for the conversion cost calculation are _________.. Department A is the ?rst stage of Ping Lacson's production cycle. The ...
-
Consider the STUDENT table above. Queries based on the concatenation operator: 1. Write a query to display student ID and the name together. 2. Write a query to display names and ages of the...
-
Craig began trading on 1 June 2021 and has the following results: Before commencing to trade, Craig had only investment income. He sold all of his investments in May 2022 (realising a large capital...
-
Define and compare forms of nonverbal communication including artifacts, haptics, chronemics, proxemics, and kinesics.
-
Analyze the relationship between language and identity, and how they are affected by globalization.
-
(a) Lock, Stock and Barrel are in partnership, making up accounts to 30 June each year. Their profit-sharing agreement specifies that Lock and Barrel should receive annual salaries of 20,000 and...
-
Explain different ways of organizing labor.
-
The learning and development process in organisations is almost always presented as cyclical. Examine the provided diagram and further discuss each of the provided basic components of the Training...
-
Write the binomial probability in words. Then, use a continuity correction to convert the binomial probability to a normal distribution probability. P(x 110)
-
Sharp Ltd. incurred the following expenses in the current year: $25,000 in legal and accounting fees with respect to the issue of a new class of preferred shares. $8,000 for landscaping around the...
-
Bendana Corporation is a Canadian company that specializes in the construction of sports facilities. Although its head office is in Edmonton, final approval of all major construction projects is...
-
Can Corp., a Canadian-controlled private corporation, has net income and taxable income of $100,000 for the current year. The income is specified investment income. Determine the federal Part I tax...
-
At December 31, 2020, the investments in the portfolio of the trading securities of Kennedy Company included the following. Required a. Record the entry for the receipt of quarterly interest from the...
-
On December 31, 2020, Banff Company held an investment in Glacier Inc. bonds with an original cost of \(\$ 23,000\). The investment was classified as an available-for-sale security, had a fair value...
-
On July 1, 2020, West Company purchased for cash, eight \(\$ 10,000\) bonds of North Corporation to yield \(10 \%\). The bonds pay \(9 \%\) interest, payable on a semiannual basis each July 1 and...
Study smarter with the SolutionInn App