A shipping company orders a new $30,000,000 vessel and finances it through a (financing) lease. Fixed repayments (principal and interest) of $535,735.26 are made quarterly in advance commencing on the day of delivery and are to be made for the duration of the 25 year lease.

You are required to:

Use an Excel spreadsheet and using the actuarial method set out the interest and principal paid each quarter and determine the quarterly interest rate and the AER assuming that there is no balloon payment at the end of the lease. As a check to your model show the total repayments and the total interest paid and by deduction the total principal repaid. If the (same) repayments are paid quarterly in arrears rather than quarterly in advance determine the new quarterly interest rate and the AER assuming that there is no balloon payment at the end of the lease. Using your model with payments in advance, determine the quarterly interest rate and AER assuming there is an outstanding balloon payment at the end of the lease of $3,000,000