Need solutions for the Qoustions 6-9 with the formula and solution workout step

Question

Need solutions for the Qoustions 6-9 with the formula and solution workout step by step Present Value 5. Casino.com Corporation is building a $25 mil- lion office building in Las Vegas and is financ- ing the construction at an 80 percent loan-to- value ratio, where the loan is in the amount of $20,000,000. This loan has a ten-year maturity calls for monthly payments, and has a statecd interest rate of 8 percent. Should this loan be refinanced after three years with a new seven-year 7 percent loan, if the cost to refinance is $250,000? To make this decision, calculate the new loan payments and then the pres- ent value of the difference in the loan 6. Returning to the original ten-year 8 per- cent loan, how much is the loan pay- ment if these payments are quarterly rather than monthly payments? Using the above information, answer the fol- lowing questions. 7. For this loan with quarterly payments, how much will Casino.com Corporation owe on this loan after making quarterly payments for three years? (the amount 3. How much of the first payment is od immediately after the twelfth 1. 2. What is the monthly payment? How much of the first payment is interest? principal? How much will Casino.com Corporation owe on this loan after making monthly the original ten-year 8 percent loan? payments for three years? (the amount 9. What is the effective annual rate (EAR) on owed immediately after the thirty-sixth the original ten-year 8 percent loan? payment) payment) 4. 8. What is the annual percentage rate on

Explanation / Answer

As per rules, I will answer the first 4 sub-parts

Loan PV = 20,000,000

Maturity = 10 years = 120 months

Rate = 8% pa = 0.67% pm

a. Monthly payment = P* (r*(1+r)^n)/ (1+r)^n -1

= 20000000*0.0067*1.0067^120 / (1.0067^120 -1)

$243078

b. Interest component = 20000000*0.67% = $134000

c. Principal component = 243078- 134000 =

d. Outstanding loan balance = PV of remaining loan installments

= PV of (120-36) instalments

= 243078* (1- (1/1.0067^84))/0.0067

=

(Note there may be round off differences due to rounding of the interest rate)

109078.116

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