Lary is considering an ARM loan offered by a local lender. The loan amount is $300,000. The term of the loan is 10 years. The index today is 2%. The margin on the loan is 2%. The teaser (first year only) is 1%. The composite rate adjusts annually and is subject to annual and lifetime caps of 2% and 5%. The loan does not provide for negative amortization nor does it provide floors. The loan requires 2 points at origination. The prevailing rate in the market for similar FRM loans is 6.25%. Assume the following forecast of index rates. What is the amount of the payment due in each of months 25 through 36? Year Index Rate Forecast
0 2.00%
1 2.25%
2 2.50%
3 3.10%
4 4.15%
5 7.50%
6 5.50%
7 7.50%
8 8.00%
9 4.10%

Required:
What is the expected yield to the lender at origination from Lary's ARM loan assuming no prepayment? At the start of year 2, what is the market value of Lary's ARM loan at a required yield of 5.5%?

ernst's electrical has a bond issue outstanding with ten years to maturity. these bonds have a $1,000 face value, a 5 percent coupon, and pay interest semiminusannually. the bonds are currently quoted at 96 percent of face value. what is ernst's pretax cost of debt?

For each separate case below, follow the 3-step process for adjusting the prepaid asset account at december 31. step 1: determine what the current account balance equals. step 2: determine what the current account balance should equal. step 3: record the december 31 adjusting entry to get from step 1 to step 2. assume no other adjusting entries are made during the year. a. prepaid insurance. the prepaid insurance account has a $4,700 debit balance to start the year. a re- view of insurance policies and payments shows that $900 of unexpired insurance remains at year-end. b. prepaid insurance. the prepaid insurance account has a $5,890 debit balance at the start of the year. a review of insurance policies and payments shows $1,040 of insurance has expired by year-end. c.prepaidrent.onseptember1ofthecurrentyear,thecompanyprepaid$24,000 for 2 years of rentfor facilities being occupied that day. the company debited prepaid rent and credited cash for $24,000.

Zapper has beginning equity of $257,000, net income of $51,000, dividends of $40,000 and investments by stockholders of $6,000. its ending equity is