Answer:
correct answer is $1,544
Explanation:
given data
sold = $40,000
mortgage loan = $38,500
solution
we know that here 1 discount point cost of buyer of loan = 1 %
so discount point = $38,500 × 1% = $38,500 × 0.01 = $385
and
Points are always paid on the loan amount = $385 × 4
Points are always paid on the loan amount = $1,540 in discount points
so correct answer is $1,544
Answer:
The answer is a. $25.00
Explanation:
The bondholder's cash flow in one-year time from holding a TrunkLine's bond is calculated as:
(The possibility of TrunkLine doing well x Repayment receipt in case TrunkLine doing well) + (The possibility of TrunkLine doing poorly x Repayment receipt in case TrunkLine doing poorly) = (0.5 x 35) + (0.5 x 20) = $27.50.
The current price bondholders are willing to pay for a bond is equal to the present value of a bond's cash flow in one-year time, discounted at the interest rate on the bond 10% which is calculated as below:
27.50 / (1+10%)^1 = $25
Thus, the correct choice is a. $25.00
He has to have negative marginal returns. I hope this helps :)
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