7. Refinancing decision. Two years ago Peter borrowed from a bank 40 000 euros for 6...

7. Refinancing decision. Two years ago Peter borrowed from a bank 40 000 euros for 6 years. The interest rate for the bank loan was 9% and the repayment schedule is based on monthly annuity payments. Now, after two years have passed, the interest rates have declined and his economic situation has improved (e.g. interest margin declined). Peter now has an opportunity to refinance the remaining loan balance with a 4% interest rate. However, there is a catch. The fee for refinancing is 700 euros paid upfront.

Questions:

Find the initial monthly loan payment
Find the loan balance after two years
Now find the new monthly payment if loan is refinanced
Should Peter refinance? (Hint: Compare the refinancing fee with present value of savings)

Expert Solution

jeff jeffy answered 2 years ago

Refinancing Decision Three years ago Max borrowed from a bank 60 000 euros for 5years to...

Refinancing Decision Three years ago Max borrowed from a bank 60 000 euros for 5years to start its own company. The interest rate for the bank loan was 6% and the repayment schedule is based on monthly annuity payments. Now, after three years have passed, the interest rates have declined and its economic situation has improved ( e.g Interest rate margin declined). Max now has an opportunity to refinance the remaining loan balance with a 4% interest rate . However,...

Four years ago, you borrowed $300,000 for a ten-year period from ABC Bank at a stated...

Four years ago, you borrowed $300,000 for a ten-year period from ABC Bank at a stated interest rate of 10% p.a. with interest compounded quarterly. You have been making equal, quarterly payments on the loan during this time and now wish to repay the loan in full. The amount that you need to repay the bank today is closest to:

You borrowed from the bank $300,000 with an annual interest rate of 6% and a maturity of 30 years.

You borrowed from the bank $300,000 with an annual interest rate of 6% and a maturity of 30 years. Determine the monthly mortgage payment.

Abdullah borrowed from a bank an amount of 12,000 dinars for a period of 4 years at an interest rate of 7%.

Abdullah borrowed from a bank an amount of 12,000 dinars for a period of 4 years at an interest rate of 7%. Find the value of the monthly installment?a. 320 kwdb. 256 kwd

Kuwait All Logistics (KAL) corporation, a Kuwait based multinational, borrowed euros 10,000,000 from Deutsche Bank at...

Kuwait All Logistics (KAL) corporation, a Kuwait based multinational, borrowed euros 10,000,000 from Deutsche Bank at the beginning of the calendar year when the exchange rate was Eur 2.67 = KD 1. Before repaying this one year loan, KAL the KD depreciated to EUR 2.5 = KD 1. It also dicovers that its Berlin subsidiary has an exposed net asset position of EUR 15,000,000 which will produce a translation gain upon consolidation. What is the exchange gain or loss that...

You borrowed from the bank $300,000 with an annual interest rate of 6% and a maturity...

You borrowed from the bank $300,000 with an annual interest rate of 6% and a maturity of 30 years. Determine the monthly mortgage payment.

Question 6 (7 marks) [Note this question is from the Week 11 Tutorial] Mr Peter is...

Question 6 [Note this question is from the Week 11 Tutorial] Mr Peter is working as a Purchases Journal clerk in a small firm located on the Gold Coast. David is his friend, who works as an Accounts Payable Ledger clerk in the same firm. Peter periodically enters fictitious acquisitions. After creating a fictitious purchase, Peter notifies his Accounts Payable Ledger clerk. David enters these transactions in his ledger. When the payables are processed, the payment is mailed to the...

On January 1, 2019, ABC Company borrowed $120,000 from the bank. The loanis a 7-year...

On January 1, 2019, ABC Company borrowed $120,000 from the bank. The loan is a 7-year note payable that requires annual payments of $24,500 every December 31, beginning December 31, 2019. Assume the loan has an interest rate of 10% compounded annually. Calculate the amount of the note payable at December 31, 2020 that wouldbe classified as a current liability.

You are a loan officer at a bank. Two years ago your bank loaned Westwood Solar...

You are a loan officer at a bank. Two years ago your bank loaned Westwood Solar $100,000 to start a company selling solar panels to commercial and residential customers. The loan has an acceleration clause that permits the bank to immediately demand all payments plus the interest owed to date if Westwood Solar fails to pay an installment in any given month. Westwood Solar has made its loan payments for the past two years. However, you know that the company...

Victor put $5,000 into a bank account 7 years ago. How much should have in the...

Victor put $5,000 into a bank account 7 years ago. How much should have in the account today if the account advertises a 5% APR compounded monthly? (Round to the nearest cent and do not enter the dollar sign)

Question