FINA4920-Chap6Template - Student Name Contents Date Created...

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Unformatted text preview: Student Name Contents Date Created Date Modified Bank Loan Shark Quoted interest rate 15.0% 14.4% # Compounding periods per year 1.00 12.00 Periodic Rate Borrow today Repay in one year Effective annual rate EAR (using IRR fxn) Effective annual rate EAR (using Effect fxn) Borrow Today Repay in one year Effective annual rate EAR (simple formula) Which to choose? A B C D 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Quoted Interest Rate 6.50% 4.50% Fee Rate 0% 1.50% Amount borrowed 10,000 10,000 Loan Amount Net of Fees Date Cash Flow Cash Flow Year 0 Year 1 EAR Which Bank? 2nd National Bank 3rd National Bank A B C 1 2 3 4 5 6 7 8 9 10 11 12 13 14 A SIMPLE MORTGAGE Mortgage principal 100,000 Interest rate 8% Years 10 Annual payment ($14,902.95) Cash Flow Table Year Cash Flow 100,000.00 1-14,902.95 2-14,902.95 3-14,902.95 4-14,902.95 5-14,902.95 6-14,902.95 7-14,902.95 8-14,902.95 9-14,902.95 10-14,902.95 Effective annual rate (EAR) A B 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 30-YEAR MORTGAGE with origination fee...
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This note was uploaded on 06/06/2011 for the course STAT 4290 taught by Professor Lazar during the Spring '11 term at University of Georgia Athens.

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FINA4920-Chap6Template - Student Name Contents Date Created...

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