The Nomad New Zealand Financial Group has identified four small apartment buildi

Question

The Nomad New Zealand Financial Group has identified four small apartment buildings in which it would like to invest. Mrs. Nomad has approached four savings and loan (S&L) brokers regarding the financing details. Because Mrs. Nomad has been a good client in the past and has maintained a high credit rating in the community, each S&L is willing to consider providing all or part of the mortgage loans needed for each property. Each loan officers has set differing interest rates on each property. Rates are affected by the neighborhood of the building, condition of the property, and desire by the individual S&L to finance various-sized buildings. Each S&L has placed a maximum credit ceiling on how much it will lend Nomad Financial in total. This information is summarized below:

Each building is equally attractive as an investment to Mrs. Nomad, so she has decided to purchase all buildings possible at the lowest total payment of interest. From which S&L should she borrow to purchase which buildings? More than one S&L can finance the same property. Consider this a balanced transportation problem. Answer the following:

1. What is the total interest paid to all institutions?

2.What is the average interest rate paid? (hint: total interest paid / total flow outs).

Note: answer as a percentage with two decimal places (12.34 = 12.34%). Adjust your Excel cell accordingly.

3.How much interest is paid to Kiwi Bank?

4.How much interest is paid to SBS Bank?

5.How much interest is paid to Westpac?

6.How much interest is paid to Yalta?

7.How much of a loan does Kiwi Bank provide Victoria St.?

8.How many loans does Yalta provide? (ex: 0, 1, 2, 3, or 4)

9.How much does Westpac allocate to Bond St.?

10. At least one broker services three properties.

The Nomad New Zealand Financial Group has identified four small apartment buildings in which it would like to invest. Mrs. Nomad has approached four savings and loan (S&L;) brokers regarding the financing details. Because Mrs. Nomad has been a good client in the past and has maintained a high credit rating in the community, each S&L; is willing to consider providing all or part of the mortgage loans needed for each property. Each loan officers has set differing interest rates on each property. Rates are affected by the neighborhood of the building, condition of the property, and desire by the individual S&L; to finance various- sized buildings. Each S&L; has placed a maximum credit ceiling on how much it will lend Nomad Financial in total. This information is summarized below: PROPERTY (interest rate) Maximum Bond St. Cuba St. Manning Ln. |Victoria St. Credit Line Broker Kiwi-Bank SBS Bank Westpadc Yalta Loan required $120,000 $80,000$100,000 $140,000 8% 9% 9% 10% 5% 10% 11% 10% 10% 12% 10% 10% 11% 10% 9% 10% $80,000 $100,000 $120,000 $140,000 Each building is equally attractive as an investment to Mrs. Nomad, so she has decided to purchase all buildings possible at the lowest total payment of interest. From which S&L; should she borrow to purchase which buildings? More than one S&L; can finance the same property. Consider this a balanced transportation problem. Answer the following:

Explanation / Answer

As per the above given information following is the best possible and cheapest combination is given below:

1) Cuba St property loan from kiwi bank@8% of $ 80 total cost $6.4

2) Bind st loan from SBS $60 @ 9% and balance $ 60 @9% from Westpac total cost is $10.80

3) Manning loan from yaltra $100 @10% = cost is $10

4) Victoria loan from SBS $40 @ 10% and $60 @ 9% from westpac and balance from yaltra $40 @ 10%. Total Cost is 4+5.4+4=$13.4

Answers:

1. Total cost of interest is $40.60'

2. Average int rate =40.60/440=9.28%

3.int paid to kiwi is $6.4

4.SBS bank int is $9.4

5.west pac int is $10.8

6. yaltra int is $14

7. no loan

8. two loans provided by yaltra

9. westpac loan allocation to bond st is $60

10. no one service to three properties.

broker/property name bond strt cuba manning victorio total $'000 kiwi - 80 - - 80 sbs 60 - - 40 100 westpac 60 - - 60 120 yaltra - - 100 40 140 total($'000) 120 80 100 140

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