ECON6033 A1 Solution.pdf - ECON6033 Corporate Finance...

ECON6033 Corporate Finance
Assignment 1 Solution
Question 1
(a)
𝑃? =
?
?
(1 −
1
(1 + ?)
𝑛𝑇
)
7,000,000 × 0.7 =
?
5% − 1.5%
12
(1 −
1
(1 +
5% − 1.5%
12
)
120
)
? = $48454
The monthly installment of the original mortgage is $48454.
(b)
Until Mar 1
st
2016, Mr. Wong has paid the installment for 26 months.
𝑅𝑒?𝑎𝑖?𝑖?𝑔 ?𝑎?𝑎?𝑐𝑒 =
?
?
(1 −
1
(1 + ?)
𝑛𝑇
)
=
48454
5% − 1.5%
12
(1 −
1
(1 +
5% − 1.5%
12
)
120−26
)
= $3,978,626
By replacing the old mortgage with the new mortgage, Mr. Wong borrowed $9,000,000 and
repaid the old loan and therefore he will have a cash inflow of $(9,000,000*0.7-3,978,626)=
$2,321,374.
(c)