Robert is considering the purchase of 80 acres of land South Texas for $3,256.38 per acre. A bank will loan him $3,030.00 per acre of land and the loan will be fully amortized over 12 years at 9%. The outstanding balance of loan will be paid at the end of the fifth year. Assume that the marginal tax rate is 14% and the inflation rate is 3%.
Calculate the loan payment.
a. $423 b. $578
c. $272 d. None of the answers are correct
Calculate the interest paid in the second year.
a. $259 b. $244
c. $272 d. None of the answers are correct
Calculate the tax savings from interest payments in the first year.
a. $36 b. $38.18
c. $34 d. None of the answers are correct
Calculate the loan balance at the end of the second year.
a. $2,879 b. $2,536.84
c. $2,715 d. None of the answers are correct