# 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…