Question

Question 2. You have approached Commonwealth Bank for a loan to buy a house. The bank offers you a $500 000 loan, repayable in equal monthly instalments at the end of each month for the next 30 years. Required: a. If the interest rate on the loan is 4.5% per annum, compounded monthly, what is your monthly repayment (to the nearest dollar)? b. What is your weekly payment if you wish to pay weekly instalments and the interest rate is compounding weekly? 1

Question 3. Harvey Norman’s Furniture has approved the maximum payment credit for the furniture you bought of $150 a month for 60 months. The annual interest rate 12%. a. How much furniture can you afford to purchase using the credit offered by the store? b. How much furniture can you afford to purchase using the credit offered by the store of the rate is 15%? Question 5. Fred is planning to invest the following amounts at 5% interest pa. Required: a. Draw out the timeline of this investment flow b. How much money will he have saved at the end of year 3? c. How much money will he have saved at the end of year 3 if the interest rate 5% is compounding semi-annually? End of year Amount 1 $6000 2 $7500 3 $1050 2

Question 6. Your company just signed a sales contract with a new customer that will earn your company the cash flow as follow: Required: a. Draw out the time line of this cash flow? b. What is this contract worth as of the end of year 4 if the firm earns 5% on its savings? c. What is this contract worth today if the rate of return 6% applies?

Answer #1

2) Here we use pmt formulae in excel to find the payment monthly or weekly

=pmt(rate,nper,pv,fv,type)

a)4.5% monthly

Rate= interest rate based on compounding frequency=4.5%/12(since monthly compounding)

Nper=period=30*12(since it is for 30 years and monthly compounding)

Pv=500000

Fv=0

Type=0

=pmt(4.5%/12,30*12,500000,0,0)=2533

b)4.5% weekly

Rate= interest rate based on compounding frequency=4.5%/52(since weekly compounding)

Nper=period=30*52(since it is for 30 years and weekly compounding)

Pv=500000

Fv=0

Type=0

=pmt(4.5%/52,30*52,500000,0,0)=584

3) We can find using pv formulae in excel

=pv(rate,nper,pmt,fv,type)

a)rate is 12%

=pv(12%/12,60,-150,0,0)=6743.26

b)rate is 15%

=pv(15%/12,60,-150,0,0)=6305.19

You have approached Commonwealth Bank for a loan to buy a house.
The bank offers you a $500 000 loan, repayable in equal monthly
instalments at the end of each month for the next 30 years.
Required:
a. If the interest rate on the loan is 4.5% per annum, compounded
monthly, what is your monthly repayment (to the nearest
dollar)?
b. What is your weekly payment if you wish to pay weekly
instalments and the interest rate is compounding weekly?...

National First Bank offers you a home loan for the next 30
years. The interest rate on the loan is 2.5% per annum. Required:
a. If the bank says that you need to pay $500 each week and the
interest rate is compounded weekly, what is the amount of your home
loan? b. What is your monthly payment if you wish to pay monthly
instalments and the interest rate is compounding monthly?

QUESTION TWO – Cash Flow Valuation
As the General Manager of Glentonics you approached HFC Bank in
order to obtain a term loan so that the company can buy a new
production equipment. The bank offers your company a loan of $1.5m
over a fifteen-year period at a rate of interest of 9.00 per cent,
payable at the end of each month.
Before making the recommendation to go with HFC Bank, you
decided to approach Bred Bank to obtain a...

Aya and Harumi would like to buy a house and their dream house
costs $500,000. They have $50,000 saved up for a down payment but
would still need to take out a mortgage loan for the remaining
$450,000 and they’re not sure whether they could afford the monthly
loan payments. The bank has offered them an interest rate of 4.25%,
compounded monthly. How much would they have to be able to afford
to pay each month in order to pay...

1.)
You
want to buy a house in Hermosa Beach CA, but you can only afford to
make monthly payments of $7,100. The interest rate on mortgages
right now is 4.25% p.a. with monthly compounding (APR), fixed for
30 years, with monthly payments. You have $155,000 saved to use as
a downpayment. What is the most that you can afford to pay for a
house (ignoring closing costs, property taxes, etc..)?
Answer: $1,598,265.76
2.)
Under
the same assumptions described in...

Frodo is going to buy a new house for $304,000. The bank will
offer a loan for the total value of the house at 7.6% APR for 20
years. What will be the monthly payment for this mortgage?
To answer this question which calculator will you use?
Systematic Savings - Find total saved with a monthly deposit
Systematic Savings - Find monthly deposit to achieve a savings
goal
Loan - Find monthly payment for a loan
Loan - Find loan...

Lorraine a 5.5 year loan of $54,000 with Westpac Bank. She plans
to repay the loan in 22 equal quarterly instalments starting today.
If the rate of interest is 6.2% p.a. compounding quarterly, how
much will each repayment be worth?
Select one:
a. $2,658.97
b. $2,712.58
c. $2,871.08
d. $2,915.58

You want to buy a house that costs $210,000. You have $21,000
for a down payment, but your credit is such that mortgage companies
will not lend you the required $189,000. However, the realtor
persuades the seller to take a $189,000 mortgage (called a seller
take-back mortgage) at a rate of 5%, provided the loan is paid off
in full in 3 years. You expect to inherit $210,000 in 3 years, but
right now all you have is $21,000, and...

You are planning to buy a house worth $500,000 today. You plan
to live there for 15 years and then sell it. Suppose you have
$100,000 savings for the down payment. There are two financing
options: a 15-year fixed-rate mortgage (4.00% APR) and a 30-year
fixed-rate mortgage (5.00% APR). The benefit of borrowing a 30-year
loan is that the monthly payment is lower. But since you only plan
to hold the house for 15 years, when you sell the house...

You are shopping for a house and wonder what you can afford.
Banks look at collateral, creditworthiness and capacity (ability to
pay) when making loans. Assume you have sufficient downpayment and
credit score. Your bank has a requirement of 28% housing expense
ratio and your gross monthly income is $5,450. How much can you
afford to pay in principal, interest, taxes an insurance (PITI)
each month?
Show how you calculated how much you can afford to spend on a
home...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 1 minute ago

asked 1 minute ago

asked 1 minute ago

asked 8 minutes ago

asked 8 minutes ago

asked 9 minutes ago

asked 9 minutes ago

asked 12 minutes ago

asked 14 minutes ago

asked 14 minutes ago

asked 15 minutes ago

asked 16 minutes ago