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Loans and Investments using Excel

I need help answering the questions below. The answers need to be put into excel using the formulas. The formulas have to be shown when the box with the answer is highlighted. Please let me know if you can work on this. Its a very small project that needs to be done by Wednesday morning.

1. A borrower can obtain an 80 percent loan at an 8 percent interest rate with monthly payments. The loan is to be fully amortized over 25 years. Alternatively, he could obtain a 90 percent loan at 8.5 percent rate with the same loan term. The borrower plans to stay in the home for the entire loan term.

a. What is the incremental cost of borrowing the additional funds?

b. How would your answer change if 2 points were charged on the 90 percent loan?

c. Would your answer to part (b) change if the borrower planned to be in the home only 5 years?

2. a potential homeowner has $60,000 to invest in a $280,000 home. He can obtain either a $220,000 loan at 9.5 percent for 20 years or a $180,000 loan at 9 percent for 20 years and a home equity loan/ 2nd mortgage of $40,000 at 13 percent for 20 years. All loans require monthly payments and are fully amortizing.

a. Which alternative should the borrower choose, assuming he will be in the house for the full loan term?

b. Would your answer change if the borrower plans to be in the home for only 5 years.

c. Would your answers to (a) and (b) change if the 2nd mortgage had a 10 year term?

3. a homeowner obtained a fully amortizing mortgage 5 years ago for $95,000 at 11 percent for 30 years. Mortgage rates have dropped so that a fully amortizing 25 year loan can be obtained at 10 percent. There is no prepayment penalty on the mortgage balance of the original loan, but 3 points will be charged on the new loan and other closing costs will be $2,000. all payments are monthly.

a. Should the borrower refinance if he plans to be in the home for the remaining loan term? Assume the homeowner borrow only an amount equal to the outstanding balance of the loan.

b. Would your answer change if he planned to be in the home only 5 more years?

4. A secondary mortgage purchasing company wants to buy your mortgage from the local savings and loan. The original balance of your mortgage was $140,000 and was obtained 5 years ago with monthly payments at 10 percent interest. The loan was to be fully amortized over 30 years.

a. What should the secondary mortgage purchasing company pay if they want an 11 percent return?

b. How would your answer in part (a) change if the Secondary mortgage purchasing company expected the loan to be repaid after 5 years?

Skills: Accounting, Business Analysis, Excel, Finance, Management

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lucky2gaf

Hi, please view my PM for more details, thanks.

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