1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Afina-wow [57]
3 years ago
8

A few years back, Dave and Jana bought a new home. They borrowed $230,415 at a fixed rate of 5.49% (15-year term) with monthly p

ayments of $1,881.46. They just made their twenty-fifth payment and the current balance on the loan is $208,555.87.
Interest rates are at an all-time low and Dave and Jana are thinking of refinancing to a new 15-year fixed loan. Their bank has made the
following offer: 15-year term, 3.0%, plus out-of-pocket costs of $2,937. The out-of-pocket costs must be paid in full at the time of refinancing.
Build a spreadsheet model to evaluate this offer. The Excel function:
=PMT(rate, nper, pv, fv, type)
alculates the payment for a loan based on constant payments and a constant interest rate. The arguments of this function are as follows:
rate = the interest rate for the loan
nper = the total number of payments
pv= present value - - the amount borrowed
fv = future value - - the desired cash balance after the last payment (usually 0)
type = payment type (0 = end of period, 1 = beginning of the period)
For example, for Dave and Jana's original loan there will be 180 payments (12*15 = 180), so we would use =PMT( .0549/12, 180, 230415,0,0) = $1881.46. Note that since payments are made monthly, the annual interest rate must be expressed as a monthly rate. Also, for payment calculations, we assume that the payment is made at the end of the month.
Assume that Dave and Jana have accepted the refinance offer, and that there is no pre-payment penalty, so that anything above the beyond the required payment is applied to the principal. Construct a spreadsheet model in Excel so that you may use Goal Seek to determine the monthly payment that will allow Dave and Jana to pay off the loan in 12 years. Do the same for 10 and 11 years. Which option for prepayment if any, would you choose and why?
(Hint: Break each monthly payment up into interest and principal [the amount that gets deducted from the balance owed] Recall that the monthly interest that is charged is just the monthly loan rate multiplied by the remaining loan balance.)
If required, round your answers to two decimal places.
Pay off loan in years Additional Payment
10 Years $
11 Years $
12 Years $
Which option for prepayment if any, would you choose and why?
Business
1 answer:
Aleks [24]3 years ago
7 0

Answer:

Explanation:

If required, round your answers to two decimal places.

Pay off loan in years Additional Payment

10 Years $

11 Years $

12 Years $

Which option for prepayment if any, would you choose and why?

New monthly payment

PMT(3%/12, 15*12, 208555.87, 0, 0) = $1,440.25

Now, we need find the additional amount that they need to pay in order to repay their outstanding loan in 10,11 and 12 years. So, using the above formula, we get

10-year installment = PMT(3%/12, 10*12, 208555.87, 0, 0) = $2,013.83

11-year installment = PMT(3%/12, 11*12, 208555.87, 0, 0) = $1,856.93

12-year installment = PMT(3%/12, 12*12, 208555.87, 0, 0) = $1,726.40

Additional Monthly Payment

10-year: $2,013.83 - $1,440.25 = $573.58

11-year: $1,856.93 - $1,440.25 = $416.68

12-year: $1,726.40 - $1,440.25 = $286.15

You might be interested in
When assessing whether product release deadlines were met during the first three months of the year, the quality assurance (QA)
Amanda [17]
B because I believe I did this before
8 0
2 years ago
A running shoe company wants to reach "avid marathon runners" instead of just "sports fans". which targeting method should this
fiasKO [112]
The correct answer:
Custom affinity audiences

Source, explanation and more answers: https://goo.gl/LkZN6c
3 0
3 years ago
Studies show that OSHA employees fail to properly inspect and regulate many workplaces, primarily because they do not have _____
Viefleur [7K]

Answer:

Studies show that OSHA employees fail to properly inspect and regulate many workplaces, primarily because they do not have __________.

sufficient resources.

Explanation:

OSHA means Occupational Safety and Health Act.  The law was passed in 1970 to protect workers rights to safe working environments and to promote good health of workers.  OSHA employees are expected to properly inspect and regulate all workplaces.  But lack of resources (human, material, and financial) have hindered the attainment of the objectives of the law.  The OSHA employees have also faced challenges from employers who would rather not comply with workplace safety regulations.

5 0
3 years ago
A company collected $10,000 cash from a customer as a deposit for goods that will be shipped next quarter.
Sholpan [36]

Answer:

(A) Total assets,

(C) Cash from operations and

(D) Total liabilities

Explanation:

A company collecting $10,000 cash from a customer as a deposit for goods that will be shipped next quarter is an example of an unearned revenue. It is receiving money from the customer in advance for the good or service yet to be provided.

And this is considered as a liability and recorded in the balance sheet as such because the company now owes the customer.

When the good or service is now provided, it increases the total assets.

8 0
3 years ago
Read 2 more answers
Which of the following is not true of taxable asset purchases?
shutvik [7]

Answer:

e. None of the above

Explanation:

The taxable asset purchases allows the individual to increase or step up the tax basis of acquired assets so as to reflect the price of the purchases made.

If one buy an assets, then he or she wants to allocate total purchase price in a way which gives a favorable postacquisition tax results.

In case of taxable asset purchases, the tax credits or the net operating losses cannot be transferred from the target firm to the acquiring firm.

6 0
2 years ago
Other questions:
  • A cost associated with home buying would be:
    7·2 answers
  • Period costsSelect one:a. are used to compute product cost.b. are selling costs and administrative costs.c. can be included in o
    14·1 answer
  • For a communication to be classified as advertising, which of the following essential criteria must be met?
    6·1 answer
  • 1. When the Fed sells bonds in open-market operations, it _____________ the money supply.
    6·1 answer
  • Brett, the manager at Warson’s Diner, plans to promote Keisha, one of the waitresses, to the position of an assistant manager. H
    12·1 answer
  • Ronald is the sole owner of a fast food store. Over the past six months, his sales have fallen and the store has been running at
    13·1 answer
  • Specialization__________ the productivity of a nation's resources and allows for larger total _________.
    12·1 answer
  • The amount of money left in a checking account after the checks and the service charges have been deducted is called the:
    11·2 answers
  • Swifty Corporation had the following selected transactions.
    15·1 answer
  • Assignments in which there is a mismatch between an employee's skills and past experiences and the skills required for success o
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!