Question

A farmer is considering borrowing money from a bank. Given the following information: Initial loan amount...

A farmer is considering borrowing money from a bank. Given the following information: Initial loan amount is $88,000. The loan will be fully amortized in 3 years at 12%. Marginal tax rate is 20%.

(i) What is the total interest payment for this loan?

   a.         $25,514.24                             b.         $26,413.77    

c.          $18,318.02                             d.         $21,916.13

(ii) What is the total amount of tax savings from interest on this loan?

                        a. $4,383.23                                       b. $5,382.58

                        c. $3, 593.60                                       d. None of the answers are correct

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

EXCEL FORMULA:

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A farmer is considering borrowing money from a bank. Given the following information: Initial loan amount...
A farmer is considering borrowing money from a bank. Given the following information: Initial loan amount is $250,000. The loan will be fully amortized in 3 years at 14%. Marginal tax rate is 15%. (i) What is the loan balance at the end of 1st year? a. $195,791.34          b. $177,317.13           c. $253,676.47           d. None of the answers are correct            (ii) What is the loan balance at the end of 2nd year? a. $129,880.74           b. $117,789.86           c. $94,458.66             d. None...
John is considering the purchase of 100 acres of land in East Texas for $2,500 per...
John is considering the purchase of 100 acres of land in East Texas for $2,500 per acre. A bank will loan him $2,000 per acre of land and the loan will be fully amortized over 12 years at 6%. The outstanding balance of the loan will be paid at the end of the 5th year. Assume that the marginal tax rate is 12% and the inflation rate is 4%. (Answer the following questions on a per acre basis) (i) Calculate...
John is considering an adjustable rate mortgage loan with the following characteristics: • Loan amount: $400,000...
John is considering an adjustable rate mortgage loan with the following characteristics: • Loan amount: $400,000 • Term: 30 years • Index: one year T-Bill • Margin: 2% • Periodic cap: 2% • Lifetime cap: none • Negative amortization: not allowed • Financing costs: 1% origination fee and 2 points.   The Treasury bill yield is 4% at the outset and is expected to increase to 6% at the beginning of the second year and to 11% at the beginning of...
You applied for a one-year loan of $7000 from a bank that lends money at a...
You applied for a one-year loan of $7000 from a bank that lends money at a discount rate of 6%. (a) Calculate the amount of discount and the proceeds. (b) Find the rate of interest that is equivalent to a discount rate of 6%. (c) If you were to borrow the loan from a bank in Europe, what rate of interest would be equivalent to the Canadian rate in part (b) of this question?
Sheldon borrowed $30,000 from the First National Bank of Bloomington on January 1, 2020. This loan...
Sheldon borrowed $30,000 from the First National Bank of Bloomington on January 1, 2020. This loan is amortized over 3 equal annual payments using an annual interest rate of 10.00%. The first annual payment of $12,063.44 is due on January 1, 2021. What amount of the first loan payment due on January 1, 2021 is interest?
Solve using excel: A. Given the following information, calculate the balloon payment for a partially amortized...
Solve using excel: A. Given the following information, calculate the balloon payment for a partially amortized mortgage. Loan amount: $84,000, Term to maturity: 7 years, Amortization Term: 30 years, Interest rate: 4.5%, Monthly Payment: $425.62. 
 B. Given the following information about a fully amortizing loan, calculate the lender's yield (rounded to the nearest tenth of a percent). Loan amount: $166,950, Term: 30 years, Interest rate: 8 %, Monthly Payment: $1,225.00, Discount points: 2. C. Given the following information, calculate the...
Use an Excel worksheet to answer the following five car loan problems you borrowed money from...
Use an Excel worksheet to answer the following five car loan problems you borrowed money from your local bank to purchase a car. The bank requires you to repay the loan over 48 months and charges a fixed, annual interest rate of 6 percent. The amount of your loan is $25,000 a,How much will your loan payment be each month? b,How much of the first loan payment will go toward principal? c,How much interest will you pay during the 1st...
A farmer meets his short-term capital needs by establishing a line of credit and borrowing as...
A farmer meets his short-term capital needs by establishing a line of credit and borrowing as follows. All the borrowed money plus interest is paid back on August 1 when the crop is sold. Calculate the approximate total amount of interest paid, assuming a 5% annual interest rate. March 1                      $40,000 April 1                        $15,000 May 1                         $9,000 June 1                         $20,000 a. $16,350 b. $1,789 c. $4,200 d. $1,373
You are considering making a loan at the bank. You will borrow $10,000 from the bank...
You are considering making a loan at the bank. You will borrow $10,000 from the bank today. The interest rate on the loan is 5 percent nominal compounded annually. You will completely pay off the loan with two equal payments. The first payment is due one year from today, and the second payment is due two years from today. Your loan payments will be $5378.05 each. How much will your loan balance be after you make the first payment? A....
At the end of the day ABC Bank loans a significant amount of money and, as...
At the end of the day ABC Bank loans a significant amount of money and, as a result, does not have enough money in reserves to meet the federal reserve ratio. What can ABC Bank do to meet the federal reserve ratio? Select one: a. Borrow money from DEF Bank at the discount rate. b. Loan more money to another bank called DEF Bank. c. Borrow money from DEF Bank at the federal funds rate. d. Nothing. ABC Bank will...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT