Question: 1 ballpark method is a method of estimation that gives the closest possible value

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Question: 1 ballpark method is a method of estimation that gives the closest possible value

Total sunken cost= total cost of purchase

=$105,500 +(1.7% of 105500)+ 325+210+420+300+240+620

=$109408.5+375+8500

Total cost incurred =118283.5

The risk free rate of return is assumed 3.9%

Lucinda should therefore sell the house at a value larger than 3.9%

Sales proceeds=135000-(7%of 135000)-1000

=124550

RRR ESTIMATE= (expected gains-sunken cost)/sunken cost

={(124550-118283.5)/ 118283.5}*100%

= 5.2979%

 

 

 

 

 

 

 

 

 

Cash Flow Diagram on the loan advanced to buy the foreclosed house

118283.5

 

 

 

 

 

 

 

Key:   positive cashflows- loan borrowed

Negative Cashflows- Monthly payments

 

 

Question 2: Amortization schedule

 

total amount payments each payment Interest accrued Total Pay
118283.5 1 19713.91667 768.84275 20482.76
  1 19713.91667 768.84275 20482.76
  1 19713.91667 768.84275 20482.76
  1 19713.91667 768.84275 20482.76
  1 19713.91667 768.84275 20482.76
  1 19713.91667 768.84275 20482.76
    118283.5 4613.0565 122896.6

 

 

Question 3: from excel sheet 2

Loan amount 118284 monthly interest total Interest  
interest rate 3.90% 768.8426807 11123.95  
no of months 6      
monthly pay 20482.8      
payment 129407      
  1   RRR 54.3088
  2      

 

 

Question 4: From Excel Sheet 2

Loan amount 118284 monthly interest total Interest  
interest rate 3.90% 20482.75935 8708.275  
no of months 6      
monthly pay 20482.8      
Payment 126992      
  1   RRR 42.5151
  2      

 

Question 5: From excel sheet 2

Loan amount 118284 monthly interest total Interest  
interest rate 3.90% 9857 3533.016  
no of months 12      
monthly pay 9857      
payment 121817      
  1   RRR 35.8427
  2      

 

The formulas used in excel

PMT(rate*nper*pv)

…where…

PMT= payment made periodically

rate…The periodic rate. With monthly payments, the rate would be:
in this case, rate=3.9%

nper…The number of periods

in his case its 6 periods.