This preview shows pages 1–3. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: Forms of Borrowing Contracts 1. Zero coupon note . As an example assume a $100,000, 6%, 5year 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 2. Note with regular principal and interest payments (Mortgage) . As an example assume a $100,000, 6%, 5year 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....
View
Full
Document
This note was uploaded on 03/03/2012 for the course MGMT 351 taught by Professor Staff during the Spring '08 term at Purdue UniversityWest Lafayette.
 Spring '08
 Staff

Click to edit the document details