{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Forms of Borrowing Contracts

# Forms of Borrowing Contracts - Forms of Borrowing Contracts...

This preview shows pages 1–4. Sign up to view the full content.

Forms of Borrowing Contracts 1. Zero coupon note . As an example assume a \$100,000, 6%, 5-year zero coupon note with annual compounding. proceeds \$100,000 Proceeds = (\$100,000)(PVsa, n=5, i=6%) = (\$100,000 x .7473) = \$74,730 Effects on the accounts at borrowing: A = L + C/S + R – X – D + G – L Cash +74,730 N/P +100,000 (DN/P +25,270) -or- Effects on the accounts at borrowing: A = L + C/S + R – X – D + G – L Cash +74,730 N/P +74,730 See associated Excel spreadsheet for interest amounts and principal increases. Page 1

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
2. Note with regular principal and interest payments (Mortgage) . As an example assume a \$100,000, 6%, 5-year mortgage note with annual compounding \$100,000 = (payment)(PVa, n=5, i=6%) = (payment)(4.2124) = payment = \$23,739 Effects on the accounts at borrowing: A = L + C/S + R – X – D + G – L +100,000 M/P +100,000 See associated Excel spreadsheet for interest amounts and principal increases. Page 2 Proceeds = \$100,000
3. Note with regular interest payments and principal payment at maturity (the “bond” in the textbook) . As an example, assume a \$100,000, 6%, 5-year bond with

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern