Mat 540 Week 1

* If the price was set at $90,000 the new fixed cost percent would be 23% as that is the closest to $90,000 at $89,997

For option 2 I calculated the savings I receive from reduced payment. For that I used difference between the mortgage payments as annuity payment for 180 months for Question A and for 60 months for Question B

You have been making payments for the last 25 years and have finally paid off your mortgage. Your original mortgage was for $345,000 and the interest rate was 5% per year compounded semi-annually for the entire 25 year period. How much interest have you paid over the last 5 years of the mortgage?

9. You want to purchase a business with the following cash flows. How much would you pay for this business today assuming you needed a 14% return to make this deal?

Therefore, triple-leveraged ETF gives higher return than the unleveraged ETF. The return is not exactly three times, it is slightly more than three times of the return.

According to the calculation above, assuming that the present value is 100, S&P 500 will have higher return on the triple- leveraged ETF than the unlevered ETF. This shows us that although sometimes the triple-leveraged ETF would be more risky on loss but it can still earn more.

At an interest rate of 15% per year (3.75% for three months, the amount to borrow equals

o 20% immediately, 20% at the end of the first year, remaining 60% at a 2% per month

Given the warnings of the housing market softening, it would be safe to assume a 4% growth rate. Finally, tax savings are calculated based on deductions from mortgage interest payments and property taxes multiplied by the Lintons’ marginal tax rate of 33%.

Average lot price $50,000. Discount Rate 10%. Other parameters as shown above. Determine the Present Value of the Cash Flows, and the Present Value per Lot.

(Compound value solving for I) at what annual rate would the following have to be investe

% i=8% 1 2 3 4 5 6 7 8 9 0.980 1.942 2.884 3.808 4.713 5.601 6.472 7.326 8.162 0.962 1.886 2.775 3.630 4.452 5.242 6.002 6.733 7.435 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 6.247 i=10% i=10% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 4-21 PV of Your Bank Loan Cynthia Smart agrees to repay her PMT loan in 24 monthly PVImm.  {1 - (1  r)-n } r installments of $250 each. If the interest rate on the loan is $250 0.75% per month PVImm = {1 - (1 + 0.0075)-24 } 0.0075 (9% per annum), what is the present =$5,472.29 value of her loan payments?

1312.5 (1.00625)60/ (1.00625) 60-1 = 1907.45 / 0.45 = 4207.97 B. Amortisation Table Amount Borrowed 210000 Periods 60 Rate 0.00625 Payment $4,207.97 Months Beginning

IPmt(0.0525/1, 4, 10*1, 6500) MS Excel: PPMT Function (WS, VBA) • In Excel, the PPMT function returns the payment on the principal for a particular payment based on an interest rate and a constant payment schedule. • The syntax for the PPMT function is: • PPMT( interest_rate, period, number_payments, PV, [FV], [Type] ) • interest_rate is the interest rate for the loan. • period is the period used to determine how much principal has been repaid. Period must be a value between 1 and number_payments.

The present outstanding value of the loan = PMT [1- 1/ (1+ annual rate of interest/m) ^number of years *m / annual rate of interest/m]. Here, m is a number of times compounding occurred in the year.