All Bets Corporation is building a $40 million office building in Las Vegas and is financing the construction at an 80 percent loan-to-value ratio, meaning they will make a 20% down payment and finance the remainder of the building. The loan has a ten-year maturity, calls for monthly payments, and has a fixed interest rate of 6 percent.
Using the above information, create a full amortization table, and then answer the following questions:
1) What is the monthly payment?
2) How much of the first payment goes toward interest?
3) How much of the first payment goes toward principal?
4) How much will All Bets Corporation owe on this loan after making monthly payments for three years (the amount owed immediately after the thirty-sixth payment)?
5) If All Bets can add $5 million to its 20th payment, should they? Why or why not?
