Financial Management Week 2
Student’s Name
Institutional Affiliation
Date
Annual income = $36,000
Monthly Income = $3,000.
1. Present Value of the Payments
The composition of income can be defined as the association between two or more buyers to acquire a good of a higher value. Its operation is straightforward: when determining the maximum amount of the installments (which should not exceed the margin of 30% of monthly income), the financial institution adds the earnings of all participants. If the individual has a salary of $ 3,000.00, the owner can commit a maximum of $840.00 per month. Now, adding the individual's income, this is also $ 3,000.00 (Sinnott, 2016). The margin jumps to $1,800.00, allowing the financing of the higher value property.
Average annual auto finance premium = $3,000 = 10%
= $300.00
Average annual house loan premium = $3,000 = 28%
= $840 USD
2.
The maximum car loan they will afford at an interest rate of 7 percent for 60 months is estimated in Excel and the screenshot below. The applicant's age is a factor that directly impacts the viability of the income composition and must be rigorously assessed before the participants are defined (Zahran & Ezeldin, 2020). To define the maximum term of the financing, the age of the applicant will be taken into account, since there is a maximum age for someone to have active real estate financing in the country. Since the smaller the number of installments, the higher the value of each installment. The presence of an applicant of older age can cancel the benefits of the income composition, even preventing the release of credit in the desired amount (Zahran & Ezeldin, 2020). The auto loan amortization schedule is calculated in Excel and the screenshot provided below:
The auto loan interest that they will take is $15,150.60.
Payment down = 3 per cent
Car worth they may afford = $15,150.60/(1-3 per cent)
= for $15,619.18.
Car worth they may afford is $15,619.18.
The maximum home loan they can afford is calculated in Excel at a 5 percent interest rate for 30 years or 360 months, and the screenshot below:
The Home Loan Value they can take is $156,476.56.
Payment down = 10 per cent
Home value they are able to afford = $156,476.56/ (1-10%)
= $173,862.84
A vehicle that they can buy is worth $173,862.84
3. Original Principal
Some aspects must be considered in the composition of income for financing and deserve special care. First of all, it is worth remembering that the applicant becomes the owner of the property, and, of course, there must be a harmony of interests and well-defined rules to avoid future unpleasantness. It is also worth noting that if one of the participants becomes in default, the property may be subject to seizure (Leece, 2017). It is equally important to remember that each applicant will have the percentage of their income used in the composition committed to the purchase of a new property through financing.
Monthly revenue is $3,000
Let's say that the interest rate on home and auto loans is 10 percent
So your down payment is 3% on housing, 10% on car fine lets you return to this later
Housing loans constitute 28% of your monthly profit = 3000 X 28/100 = 840
Car loan 10 percent a month is 3000 X 10/100 = 300
And the net profit balance of 840 + 3000= 1140 is $18600 (Sinnott, 2016).
4. Original Value Formula
An item that deserves extra attention is the compromise of income, especially when only one person becomes responsible for the payment of benefits, which is very common. If this is your case, be sure of your financial capacity to assume the installments, since a miscalculation can lead to default, culminating in the loss of the property (Leece, 2017).
300 X 48 (4 years) = $14400 plus 10 percent 4-year interest
Complete interest 10 percent = 1440 for 4 years = interest 360/12 per year = interest 30 $a month
So the car’s main amount is 12960
Monthly calculation
12960/48 = 270 principal
1440/48 = 30 shares
Average EMI = $300
So the bill for the vehicle down is $1296 10 percent of the amount
The vehicle price will then be $14400 (1296 + 12960) if the interest rate is 10 percent (Zahran & Ezeldin, 2020).
5. Housing Price
Taking all the necessary precautions, it is possible to count on an extra resource to acquire it. The credit analysis is done individually; that is, the applicant can have pending registration (Leece, 2017). Each participant can use the resources of his FGTS linked accounts to compose the entry, settle installments or amortize the outstanding balance, according to the fund's own rules of use.
840 X 180 = 151200, plus interest rate of 10 per cent for 15 years
15120 Gross 15-year reward, 15120/15 = 1008/12 = $84 a month
Therefore, the principal amount is 136080$/180 (15 years) = 756 per month
Its emi = 840
Maximum down payment is 4082.40
Complete housing is 140162.4 with value of 10 per cent (Zahran & Ezeldin, 2020).
References
Leece, D. (2017). Mortgage design in the 2000s: theoretical and empirical issues. Journal of Property Finance, 2-13.
Sinnott, W. B. (2016). Scheduling Major Capital Expenditures to Minimize Costs. Journal‐American Water Works Association, 67(5), 7-24.
Zahran, K., & Ezeldin, A. S. (2020). Finance-based scheduling: optimization of results-based funded multiple projects. Canadian Journal of Civil Engineering, 47(4), 8-37.