1. Imagine that you want to obtain a loan from a bank for a business that...

1. Imagine that you want to obtain a loan from a bank for a business that you operate through a corporation. The bank wants assurances that the loan will be repaid. It gives you a choice to advance the loan to the corporation and for the bank to obtain from the corporation a mortgage registered against land owned by the corporation, or to advance the loan to the corporation but to ask you to give the bank a personal guarantee of the loan. What are the advantages or disadvantages under either scenario?

Expert Solution

Answer: Loan- Loan is a liability, when a company takes loan, it has to pay interest on the loan. Loan can be of many types.

Advantage of mortgaging the corporation's land against loan- Bank will have the corporation's land as guarantee and the loan will be secured, in case of non payment of loan. You as a person, will not have any personal liability against that loan.

Disadvantage of mortgaging the corporation's land against loan- There will be lot of paper work and documentation, this process may take time in processing the loan.

Advantage of personal guarantee- It will take less time in processing the loan. Loan will be easier to take. Bank will have back up of personal assets of that person.

Disadvantage of personal guarantee- Person will be personally liable for the debt, if loan is not repaid by the corporation, bank will sell the person's assets and will recover the amount of loan.

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You purchase a home for $120,000. You obtain a 30 year loan from Bank Second, paying...

You purchase a home for $120,000. You obtain a 30 year loan from Bank Second, paying 20% down, with your loan to be paid off in monthly payments. a. If the annual interest rate is 8.5% and your first payment is in February, what is your outstanding principal balance after your April payment? b. How much interest would you save by obtaining a 15 year loan versus a 30 year loan? Show all work.

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1. Imagine that you want to obtain a loan from a bank for a business that...

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