Question One
A. You have a credit card with a stated interest rate of 1 % monthly. What is the APR?
_______________________%
B. Today, you borrowed money for a home loan. It was a privately placed loan with a venture capitalist (not with a bank). The fair market value of the house and land was $400,000. You made a down payment of $100,000. The stated NAI was 3.75%. Monthly payments start one month from today. The loan had 3.25 points, which you properly "paid". The term of the loan is 15 years.
i. What is the amount of your scheduled payments?
$________________________
ii. What is the APR on the loan?
_________________________%
iii. What is the balance you owe after 3 years, assuming you make all scheduled payments timely (and no additional payments)?
$________________________
iv. The date is now December 2015. The effective rate for comparable secured loans is 14.5%. The owner of the note would then like to sell it. What would be a fair value, assuming you and the security fit the norm for comparable secured loans?
$_________________________
v. Do you believe the holder would accept from you the amount you computed in iv to pay off the loan? Highlight one:
YES NO
vi. If your answer in iv was NO, please explain.
Question Two
Your client is a 37-year-old female. Her husband is 45. Both are in good health. You and husband's attorney have agreed that $10,000 per month in permanent periodic alimony would be appropriate for husband to pay wife following their impending dissolution of marriage. Under state law, such alimony ends on the death of either former spouse or if the recipient re-marries (or cohabits with a member of the opposite gender). You understand permanent periodic alimony is modifiable upon the showing of a substantial change in circumstances, but that lump-sum alimony is not modifiable. You also understand that lump-sum alimony survives the death or re-marriage (or co-habitation) of either former spouse. You understand neither type of alimony is generally dischargeable in bankruptcy (although you know the law can change over time, as it often does - in unpredictable ways). You are considering asking for lump sum alimony, instead. What amount do you believe would adequately and realistically compensate your client if she waived her rights to permanent periodic alimony? Do not consider the impact, if any, such a settlement might have on child support or property division.
$______________________________
Question Three
You are 25 and in good health. You do not smoke and, as best you understand your genetic make-up, you expect to live a typical lifespan within the United States. You are unmarried and do not expect to marry or to have children. You believe that if you were to retire today, you would need to have $2,500,000 in a vested retirement account at age 65. You understand withdrawals from the account would be fully taxable, but deposits into the account, as well as interest or other gains earned by the account would not be taxable (until withdrawal).
A. How much do you believe you must save, if you were to start today, to achieve your goal assuming you are female?
$______________________________
B. How much do you believe you must save, if you were to start today, to achieve your goal assuming you are male?
$______________________________