J&J; Cattle has purchased a quarter section of land for $160,000. They make a do

Question

J&J; Cattle has purchased a quarter section of land for $160,000. They make a down payment of $20,000, and the remainder of the purchase price ($140,000) is financed at 12 percent compounded quarterly with quarterly payments over 2 years. Develop an Excel® table to illustrate the payment amounts and schedule for the loan, assuming payback follows Plan 1: Pay the accumulated interest at the end of each interest period and repay the principal at the end of the loan period . Plan 2 Make equal principal payments, plus interest- on the unpaid balance at the end of the period. Plan3: Make equal end-of-period- payments. Plan4: Make a single payment of principal and interest at the end of the loan period. A different plan: Pay off the principal per the table below. In addition, pay the accumulated interest at the end of each interest- period

Explanation / Answer

Total cost 160000

Down Payment 20000

Loan amount 140,000

N = 2yrs

Int = 12% Qtryly

So EAR = (1+i/n)^n-1 = (1+12%/4)^4 -1 = 12.55%

So We have FV = PV*(1+i)^N = 140000*(1+12.55%)^2 = $177,345.04

So Single payment at end of Two yrs will be $177,345.04

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