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Table of Contents - Corporate Finance

   

Added on  2020-10-23

8 Pages1227 Words111 Views
Corporate Finance -Basics

Table of ContentsQuestion 1: ......................................................................................................................................3Question 2. ......................................................................................................................................4Question 3: ......................................................................................................................................5Question 4: ......................................................................................................................................5

Question 1: Solution:a)Mortgage Payment can be calculated by using below formula:- M = P r ( 1 + rn ) / ( 1 + rn ) – 1Here, P = loan amount = £100,000n = number of years = 20 years r = rate of interest = 5% annually therefore, Mortgage payment (PMT) = P r ( 1 + r)n / ( 1 + r)n – 1= 100000 x 0.05 (1 + 0.05)20 / (1 + 0.05)20 – 1= £8,024.26b)A table for each year balance of mortgage-Mortgage Payment (PMT) = P r ( 1 + r)n / ( 1 + r)n – 1For first year, PMT = 100000 x 0.05 (1 + 0.05)1 / (1 + 0.05)1 – 1= 5000 (1.05) / (1.05 – 1)= 5000 x 1.05 / 0.05= £105,000For second year, PMT = 100000 x 0.05 (1 + 0.05)2 / (1 + 0.05)2 – 1= 5000 (1.05)2 / (1.05)2– 1= 5000 x 1.0025 / 0.1025= £53,780.49Therefore, Number of yearMortgage amount (£)1105,000253,780.49336,720.86428,201.18523,097.48619,701.75717,281.98815,472.18914,069.011012,950.461112,038.89

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