Evaluating several loans

 

 

• Calculate the annual payment on a loan using the present value of an annuity.
• Use discounting to determine the present value of an annuity.
• Calculate the future value of an annuity and periodic annuity payments.
• Determine the present value of a bond.

Instructions: Answer the questions directly on this document. When you are finished, select “Save As,” and save the document using this format: Student ID_UnitIV. Upload this document to BlackBoard as a .doc, docx, or .rtf file. Show all of your work.

1. Your supervisor has tasked you with evaluating several loans related to a new expansion project. Using the PVIFA table (table 9.4 in the textbook), determine the annual payment on a $400,000, 8% business loan from a commercial bank that is to be amortized over a five-year period. Show your work. Does this payment seem reasonable? Explain.

 

 

 

 

 

2. Dan is considering borrowing $500,000 to purchase a new condo. Based on that information, answer the following questions. Show all work.

a) Calculate the monthly payment needed to amortize an 8% fixed-rate 30-year mortgage loan.
b) Calculate the monthly amortization payment if the loan in (a.) was for 15 years instead.
c) In a few sentences, explain the effect of a smaller loan period. How does it influence the monthly payment and interest?

 

 

 

 

 

3 Use a financial calculator or computer software program to answer the following questions:

a) Melanie is trying to save money for retirement and has a future goal of $600,000 at the end of 20 years. Determine the present value of her goal using a discount rate of 11%.
b) How would the present value change if the $600,000 is to be received at the end of 15 years instead? Explain the impact and show your work?

 

 

 

 

 

4. Your friend Anne is planning to invest $400 each year for four years and will earn a rate of 6 percent per year.

a) Determine the future value of this annuity due if her first $400 is invested now. Show your work.
b) What is the difference between an annuity due and an ordinary annuity? Explain.

 

 

 

 

 

 

5. Jimmy has a bond with a $1,000 face value and a coupon rate of 9.5% paid semiannually. It has a five-year life.

a) If investors are willing to accept a 14 percent rate of return on bonds of similar quality, what is the present value or worth of this bond? Show your work.
b) What is the impact of paying interest semi-annually rather than annually? Explain.

 

 

Sample Solution

is exposition I will talk about the associations between authority, inspiration and cooperation hypotheses, how they interface with training in associations and their limits, offering arrangements where difficulties emerge. The exposition plans to make inferences on the reasonableness of Fiedler’s Contingency Theory of Leadership, Tuckman’s Model of Group Development, Belbin’s Team Theory, and Herzberg’s Two Factor Theory practically speaking, and how intricacies like power and impact shape how they can be applied to best suit what is going on a pioneer faces.

Initiative Contingency based speculations of authority propose that there is no right or most ideal way to lead a gathering, or association, because of the critical number of limitations on a circumstance (Flinsch-Rodriguez, 2019). Fiedler, in his Contingency Theory of Leadership (Fiedler, 1967), proposes that the viability of a gathering is reliant upon the authority styles of the pioneer and their favourability to everything going on. A significant part of the hypothesis is laid out around the most un-favored associate scale (LPC). The LPC expects to measure a potential chiefs way to deal with an errand on a size of relationship persuaded to task roused, where the pioneer fits on the scale permits what is going on to be derived, and accordingly permits the recognizable proof of reasonable pioneers for assignments. The favourableness of the present circumstance relies upon three attributes: pioneer part relations, the help and trust the pioneer as from the gathering; task structure, the lucidity of the assignment to the pioneer; and positional power, the power the pioneer needs to survey a gatherings execution and give prizes and disciplines (Fiedler, 1967). In the event that the pioneers approach matches what is expected from going on, achievement is anticipated for the gathering. Fiedler’s possibility model offers an extremely stark categorisation of authority, obviously characterizing which circumstances endlessly won’t bring about progress for a likely pioneer. At the senior administration level of a hierarchal construction inside an association the hypothesis can be applied openly, right off the bat because of the simplicity at which people can be supplanted on the off chance that their LPC score doesn’t match that expected of everything going on (Pettinger, 2007). Furthermore, and above all, is to guarantee that the senior administration are ideally suited to effectively lead the association. In any case, further down the ordered progression Fielder’s possibility hypothesis starts to hold considerably less pertinence, it becomes unfeasible according to a hierarchical point of view because of the quantity of individuals at this degree of authority. The planned operations of coordinating the pioneer with their most un-favored collaborator is difficult to reliably accomplish, so a more continuum based approach is required. Figure 1: Chelladurai’s Multi-Dimensional Model of Leadership (Miller and Cronin, 2012)

There are other possibility speculations that give a more continuum based approach like Redding’s hypothesis of administration and the board, but Fielder’s depiction of how situational factors influence the authority style expected for everything going on is very valuable in figuring out the essentials of initiative (Pettinger, 2007). Chelladurai in his Multi Dimensional Model of Leadership, develops a lot of Fiedler’s hypothesis however in a continuum based approach, in which the pioneer can adjust their administration style to fit everything going on (Chelladurai and Madella, 2006). Chelladurai’s hypothesis is taken from sports psycholo

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