Basis points and percentage points are used to avoid confusion when discussing interest rate changes. If the news reported a 25-basis point increase from 4.2% – what would be the new interest rate? Explain the concept of a self-liquidating loan. Indicate how the time patterns of earnings for current and noncurrent assets are considered in formulating self-liquidating loans. Your first home costs three hundred and fifty thousand dollars. You put 16% down and finance the rest with a loan from the Farm Service Agency. The FSA charges you two and a half points. What do the points cost you in dollars?
Added by Julie S.
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2%, we need to convert the basis points to a percentage and then add it to the original interest rate. Show more…
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Problem 3: (22 points) Suppose that you obtain a loan of P dollars (the principal value) to purchase a home. The home mortgage has an annual fixed interest rate of R% and a repayment period of M months. 1. (6 points) Let x(k) represent the remaining loan amount after the kth month, and let b represent the monthly payment. Show that x satisfies the first-order difference equation x(k + 1) = ax(k) - b, and specify the value of a in terms of R (note that R% = R/100). 2. (8 points) Using the initial condition x(0) = P and the Z-transform method, solve for x(k) for k >= 0. Express your answer in terms of P, a, and b. 3. (3 points) Using x(M) = 0 and your result from part 2, solve for the monthly payment b. 4. (3 points) Compute the monthly payment for a 3.6% fixed rate (a = 1.003), 30 year loan with principal amount of $225,000 (you may verify your answer using an on-line mortgage calculator). 5. (2 points) Determine the total amount of interest paid for the loan in part 3.
Sri K.
Question 2: (20 points) A businessman borrowed $120,000 from a bank at a simple interest rate of 8% on June 12; the loan is due on September 20. Find the number of days of the loan from June 12 until September 20. Using exact interest, find the interest amount (I=?). A trader borrowed $8,000 on a 120-day 4% simple interest note. He paid $1,000 toward the note on day 35. On day 80, he paid an additional $1,000. Assume a 360-day year, what is his ending balance due? A service provider borrowed $75,000 from a local bank. The loan was for 15 months at a simple interest rate of 8%. What are the interest and the maturity value?
Adi S.
3. If you plan to purchase a home and your bank is ready to offer you a $200,000 mortgage loan for 10 years. The loan bears a compound annual interest rate of 24 percent (6% per quarter) and calls for equal quarterly installment payments at the end of each quarter for the next 10 years. a) What is the amount of the quarterly payment that you have to pay the bank? (6 points) b) Establish loan amortization schedules for the first 4 quarters only? (8 points) c) What is the total amount that will be paid at the end of 10th year?(3 points) d) What is the amount of total interest that will be paid after 10 years?(3 points)
Danielle F.
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