...extremely thin after covering all of my monthly expenses. It would make sense to first understand what my opinions are. I have to first think about the financial position I am already in. After paying all of my bills for the month, I don’t even have $100 left over to live off of for the rest of the month. This alone, causes me to think that increasing my payment amount doesn’t make sense in my current situation, but may be something I want to revisit in a few years when I have more income to spare. I can look into refinancing to see if I can possibly get a lower interest rate, but that would cost me $2000 I don’t have at the moment. At the same time, it wouldn’t hurt to figure out what interest rate would benefit me by lowering my payment and, if it’s worth it, I could come up with the closing costs. I’ve decided I will weigh my options. I will calculate how much more I will need to increase my current payment by in order to pay off this loan in 20 years without refinancing. Alternatively, my credit is in good shape so I should also be able to refinance at a lower interest rate. I will use calculations to figure out what rate will be beneficial to me by lowering my payment, taking into consideration the $2000 closing costs. The loan amount is $112,247.47 with a 20 year fixed interest rate of 5.75%. The monthly finance cost to finance $1000 at this rate is 7.0208. The formula to use here is loan amount/1000 * table figure (Smith, 2011). To figure the new payment, I divide...
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...|||| |Sheet 33 – Consumer Purchase ComparisonPurpose: To research and evaluate brands and store services for purchase of a major consumer item.Instructions: When considering the purchase of a major consumer item, use ads, catalogs, the World Wide Web, store visits and other sources to obtain the information below.||| |||| Product Exact description (size, model, features, etc.) Research the item in consumer periodicals with information regarding your product article/periodical|||article/periodical|| date/pages|||date/pages|| What buying suggestions are presented in the articles? Which brands are recommended in these articles? Why? Contact or visit two or three stores that sell the product to obtain the following information: |Store 1|Store 2|Store 3| Store name|||| Address|||| Phone/Web site|||| Brand name/cost|||| Product difference from item above|||| Guarantee/warranty offered (describe)|||| Which brand and at which store would you buy this product? Why? |||| |Sheet 39 – Auto Ownership and Operation CostsPurpose: To calculate or estimate the cost of owning and operating an automobile or other vehicle.Instructions: Maintain records related to the cost of categories listed below||| |||| Model year|2008|Make, size, model|Kia, Spectra| Fixed ownership costs||| Depreciation*||| Purchase price $ __13000___ divided by estimated life of __22___ years|$|590.00| Interest on auto loan||| Annual cost of financing vehicle if buying on credit|$|11...
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...What is refinancing risk? How is refinancing risk part of interest rate risk? If an FI funds long-term fixed‐rate assets with short‐term liabilities, what will be the impact on earnings of an increase in the rate of interest? A decrease in the rate of interest? Refinancing risk is the uncertainty of the cost of a new source of funds that are being used to finance a long‐term fixed‐rate asset. This risk occurs when an FI is holding assets with maturities greater than the maturities of its liabilities. For example, if a bank has a 10‐year fixed‐rate loan funded by a two‐year time deposit, the bank faces a risk of borrowing new deposits, or refinancing, at a higher rate in two years. Thus, interest rate increases would reduce net interest income. The bank would benefit if the rates fall as the cost of renewing the deposits would decrease, while the earning rate on the assets would not change. In this case, net interest income would increase. What is reinvestment risk? How is reinvestment risk part of interest rate risk? If an FI funds short‐term assets with long‐term liabilities, what will be the impact on earnings of a decrease in the rate of interest? An increase in the rate of interest? Reinvestment risk is the uncertainty of the earning rate on the redeployment of assets that have matured. This risk occurs when an FI holds assets with maturities that are less than the maturities of its liabilities. For example, if a bank has a two‐year loan funded by a 10‐year fixed‐rate...
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...Refinancing works to Substantial Saving Do current market conditions favors remortgage? Indeed, yes for most landlords it’s still an upright time to refinance. Refinance or Remortgage is the process of replacing existing mortgage loan with a new mortgage. This allows a borrower to obtain a better interest rate or helps to take cash out of fully paid home for further more investment. There might be any reasons for homeowners to refinance, but it is essential for them to ascertain whether his or her object for refinancing offers true benefits or not. As without the right knowledge, the risk emanates in refinancing. Hence, referring a mortgage consultant for refinance could be an added advantage since they have an in-depth market understanding...
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...QE, in definition, is a monetary policy that increases the money supply by buying government securities or any other securities from the market. With Slight difference, LTRO refers that central bank lends out money to other commercial bank in a low interest rate but with qualified collateral. Both of them are monetary policy that aim to increase the money supply by inject capital to the financial market. The main purpose is to facilitate the lending in financial market and lead the financial market become more liquid. However, the process to achieve the loose monetary policy goal is different. The main points are summarized as following 1) In terms of the amount of money inject to the financial market, it is planed and certain in QE because the quantity is directly controlled by the central bank while for the LTOR it is uncertain for the reason that whenever the banks can provides qualified collateral, central bank should lend them money. However, central bank can define the quality of the collateral so that indirectly control the amount of money. 2) As for the kinds of security that the injected money buy, QE1 purchased the mortgage back securities and QE2 put money in Treasury securities. However, implementing the LTRO, the freedom of choosing securities totally belongs to the banks. They can put aside the money borrowed for the return to the coming debt. Also, they can invest in some bonds that are qualified by central bank as collateral and use them as collateral for...
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...more, from their peaks, the term crash is, once again, appropriate) is that problems emanating from the financing side—in particular, a massive deterioration in underwriting standards and a concurrent rise of excessive leverage—can lead to problems of a similar (or greater) magnitude, even without supply problems. While most attention in commercial real estate today is focused on the dramatic deterioration in term loan performance (i.e. the performance of loans prior to maturity), we believe that a potentially even more troublesome issue is the extent to which loans originated during the 2005-2007 period will encounter problems refinancing at maturity. To date, this issue has largely been dismissed with the vague and, in our view, naive observation that lenders will simply extend the maturity dates of loans that fail to qualify for refinancing. However, the scale of this problem is virtually unprecedented in commercial real estate, and its impact is likely to dominate the industry for the better part a decade. At its core, the issue is fairly straightforward: The dramatic weakening in underwriting quality that began in 2005, along with compressing cap rates and ballooning leverage, led to rapidly rising commercial real estate prices. In 2007 the commercial real estate bubble burst, along with most other credit bubbles. Since that time underwriting standards have tightened back to their original levels, and perhaps further, as allowable leverage has plummeted and cap ...
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...lenders are now refinancing the debt of certain graduates with high credit scores and high-paying jobs. Andriotis explains that five lenders have recently refinanced $5 billion in loans, and Golman Sachs Group Inc. estimates $200 billion of student loans could become eligible for refinancing. This strategy of the lenders is aimed at stealing customers from large banks and the federal government. The federal government currently makes up about 93% of outstanding student loan balances and charge the same interest rate regardless of income or credit score. While still a small portion of the student market, lending firms could potentially transform a huge part of the lending business. Refinancing through big banks has been difficult in the past and still is today. But recently, newer, more innovative startups are making it easier on student borrowers by refinancing private and federal loans. While helping students lower interest rates is definitely a good thing, some consumer advocates argue that under this approach, most of the debtors getting a break are the wealthy, not the ones who need it most. This is because the borrowers have incentive to “cherry pick” borrowers with lower credit risk. This new attention to the student-market isn’t surprising given the huge and growing market. With tuition prices still rising, the average student debt in this country continues to climb, yet repayment terms are extremely rigid and student borrowers have far fewer refinancing options than mortgage...
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...I am just making enough money to cover my expenses and I want to pay off my loan faster. I have also given thought to refinancing my house and whether it is worth it. Is paying a little extra monthly, therefore reducing my loan by five years (option 1), worth it? Should I refinance instead (option 2)? I did my research and what I found surprised me. Currently I have twenty five years left on my mortgage but I would like to pay it off in twenty. Since I am tight on money I had to find exactly how much extra money I would need to pay every month to shorten my loan to 240 payments or twenty years. If I pay an extra $90 a month towards my principle, I will shorten my loan to twenty years and save about $23,914 in interest. This is very reasonable because before I would have paid about $104,310 solely in interest over the remaining life of the loan. I believe it is a waste to pay so much of the loan directly towards interest, by paying an extra $90 per month I am able to drop this total interest to about $80,397. I can easily see myself working couple hours a week to pay this extra $90 because of the benefits associated. I thought paying the extra monthly would be the best option before I researched refinancing options. When deciding whether it would be worth it, I looked at several interest rate options to determine at what rate it is worth it. If refinancing I would opt for another 30 year mortgage but would still like to pay it off in 20 years. First I...
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...CHAPTER 17 Does Debt Policy Matter? Answers to Practice Questions 1. a. The two firms have equal value; let V represent the total value of the firm. Rosencrantz could buy one percent of Company B’s equity and borrow an amount equal to: 0.01 × (DA - DB) = 0.002V This investment requires a net cash outlay of (0.007V) and provides a net cash return of: (0.01 × Profits) – (0.003 × rf × V) where rf is the risk-free rate of interest on debt. Thus, the two investments are identical. b. Guildenstern could buy two percent of Company A’s equity and lend an amount equal to: 0.02 × (DA - DB) = 0.004V This investment requires a net cash outlay of (0.018V) and provides a net cash return of: (0.02 × Profits) – (0.002 × rf × V) Thus the two investments are identical. c. The expected dollar return to Rosencrantz’ original investment in A is: (0.01 × C) – (0.003 × rf × VA) where C is the expected profit (cash flow) generated by the firm’s assets. Since the firms are the same except for capital structure, C must also be the expected cash flow for Firm B. The dollar return to Rosencrantz’ alternative strategy is: (0.01 × C) – (0.003 × rf × VB) Also, the cost of the original strategy is (0.007VA) while the cost of the alternative strategy is (0.007VB). If VA is less than VB, then the original strategy of investing in Company A would provide a larger dollar return at the same time that it would cost less than the alternative. Thus, no rational investor...
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...The Bourland Companies MSIRE Real Estate Finance Prof. Dr. Zhonghua Wu Gerardo Gato Agustin “Gus” Quevedo Cal Santangelo Lilia Tome Maria Carolina Vivas May 15, 2011 The Bourland Company The Bourland Company is a Real Estate family business located in Boston, Massachusetts that has always been very conservative run by Glen Bourland and never has taken unnecessary risks especially on the level of leverage it uses. It has grown very fast during the eighties and expanded from developing just multifamily properties to developing office and retail premises around Boston and the South area of New Hampshire. Fortunately, thanks to the coincidence that Glen Bourland decided to retire to Florida and delegate the control of the business to his son Michael, the company stopped to development in 1989 and also made some good sales before the market collapsed and was able to resist, in a better and stable way than other developers, the early 1990’s financial crisis. However, in 1991, Glen returned to his business as a Chairman of the company but delegated the day-to-day operations to his son. Glen’s daughter planned to move back to Boston and join the family business, adding more pressure on Michael’s decisions. In 1995, the company was doing well but had to refinance two distressed properties that were bought in 1992 and, because the credit crunch, just were able to get 3 years “miniperm” loans from Bank of Boston. Michael...
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...------------------------------------------------- Financial Project Five years ago, I bought a house for $171,000, with a down payment of $30,000, which meant I took out a loan for $144,000. My interest rate was 5.75% fixed. I am now contemplating making a change to what I have already committed to. At present I see that there are two options that I can consider to make a change. The first would be to pay off the remaining principle in 20 years instead of 25 years. The second is to see if refinancing could be a consideration. Based off of my findings, I would choose one of the changes or just continue paying the loan as is. The first thing that I did was to check my bank statement and this is what I found: Escrow payment | $261.13 | Principle and Interest payment | $822.84 | Total payment | $1083.97 | Current Loan Balance | $130794.68 | Currently I am able to make my monthly payments as well as pay my other bills for my house. Although, I am left with a little less than a $100 to live off of each month, I would still like to see if it is possible for me to add to my monthly payments to pay off my house in 20 years. To solve my dilemma, I used the periodic payment method. I found out that I would have to add $95.45 to my monthly payment to pay off my loan in 20 years. I think that it would be unreasonable to try to pay off the loan in 20 years versus 25 years due to my current financial standing. To reach the add-on figure of $95.45, I used the periodic payment...
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...county also had other debt outstanding when it declared bankruptcy, for a total of $4.2 billion, making it the biggest municipal bankruptcy in United States history. Residents of the county are worried that the bankruptcy will make their property values lower and higher taxes for county services. Governmental bankruptcies are rare and usually involve small single-purpose authorities and districts, not large, complicated counties with a lot of debt. Experts in public finance have been watching Jefferson County closely to see what kind of legal precedent it will set. Some were concerned that the successful application of Chapter 9 bankruptcy rules to municipal debt could cast a pall over the municipal bond market. The article states that the refinancing agreement covers debt held by creditors that include JPMorgan Chase, which holds about $1.22 billion of the sewer debt, the biggest block; three bond insurers; and seven hedge funds, according to a term sheet circulated in a meeting of the county commission on Tuesday. The terms call for these creditors to receive about $1.84 billion for the $2.4 billion of debt they now hold. The concessions were weighted most heavily toward JPMorgan, the term sheet said, "to increase the recovery of other sewer creditors." The bank is giving up $842...
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...Bibliography 1. Ahmed, Momtaz Uddin (2006). SME Policymaking Process – A digression on the realissue.Website:http://www.undp.org/legalempowerment/reports/National%20Consultation%20Reports/Country%20Files/4_Bangladesh/4_5_%20Informal_Business_Rights.pdf 2. Ahmed, Momtaz Uddin. (1992). Small and Medium Scale Enterprises in Industrial Development, Academic Publishers, Dhaka. 3. Ahmed, Momtaz Uddin (1984). Financing Rural Industries in Bangladesh, the Bangladesh Development Studies, Vol. XII, and No. 1 and 2, “Special Issue on Rural Industrialization in Bangladesh”. Website:http://www.google.com/#pq=ahmed%20momtaz%20uddin%202006%20sme%20policy%20making%20process&hl=en&cp=87&gs_id=6e&xhr=t&q=ahmed+momtaz+uddin+et+al+1992+small+%26+medium+scale+enterprise+in+industrial+development&pf=p&sclient=psy&source=hp&pbx=1&oq=ahmed+momtaz+uddin+et+al+1992+small+%26+medium+scale+enterprise+in+industrial+development&aq=f&aqi=&aql=&gs_sm=&gs_upl=&bav=on.2,or.r_gc.r_pw.&fp=a9b1f76dc7591fd9&biw=1024&bih=605 4. Asian Development Bank (2004). Report and Recommendation of the President to the Board of Directors on Proposed Loans and Technical Assistance Grant to the People’s Republic of Bangladesh for the Small and Medium Enterprise Sector Development Program, Retrieved from World Wide Web: www.adb.org/Documents/RRPs/BAN/rrp-ban-35225.pdf 5. Md. Shamsul Alam & Md. Anwar Ullah: SME in Bangladesh and their...
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...Running head: BUYING A HOUSE Buying a House Mildene Faulkner MAT 104 Edmund Ford, Jr. August 7, 2012 Buying a House Five years ago, I bought a house for 151,000, with a down payment of 30,000. I took a loan for 121,000. The interest rate on the house was a fixed 5.75%. I am paying more on my loan, so I can pay it off in 20 years instead of 25. I am currently paying $211.13 in Escrow payments and $706.12 in principal and interest payments. My current loan balance is $112,242.47. I am going to explain how much money I will need to pay off my loan in 20 years instead of 25. I am currently paying $917.25 in monthly payments on my house. I would like to see how much money I would have to add to my monthly payments, if I want to pay off my house in 20 years. By using the monthly payment method and the table provided to me by my realtor, I see that if I take the loan amount and divide it by 1000, and then multiply by the tablet entry of 7.0208, I would get $788.03. Then to figure out the amount of money I need to add to my monthly payment to pay of my loan in 20 years, I have to subtract $706.12, which is my monthly principle and interest from $788.03. That would give a total of $81.91. This is the amount of money I need to add to my current monthly payment in order to pay off my loan in 20 years instead of 25. I think that I would be reasonable to try to pay off the loan in 20 years versus 25 years. I think I can maintain a comfortable lifestyle doing this as long...
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...1. A liability has three essential characteristics, which of the following is not one of them? a. It is a present obligation that entails settlement by probable future transfer or use of cash, goods or services b. The obligation must be liquidated using cash, goods, or services that were earned by the entity in the performance of their normal business operation c. The liability must be an unavoidable obligation d. The transaction or other event creating the obligation must have already occurred 2. Current liabilities are: a. Liabilities that are due and payable on the balance sheet date b. Liabilities that may be paid out of any asset pool accumulated by the enterprise as long as payment is due within one year c. Due within one year or one operating cycle, whichever is longer d. Void of notes payable, as notes are always long-term 3. On October 1, 2003, a company borrowed cash and signed a one-year, interest-bearing note on which both the principal and interest are payable n October 1, 2004. How will the note payable and the related interest be classified in the December 31, 2003, balance sheet? Note Payable Accrued Interest a. Current liability Noncurrent liability b. Noncurrent liability Current liability c. Current liability Current liability d. Noncurrent liability Noncurrent liability 4. The Diana Co. issues...
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