1a. A loan for $150,000 at a 7% annual borrowing rate and a term of 25 years is
ID: 2815331 • Letter: 1
Question
1a. A loan for $150,000 at a 7% annual borrowing rate and a term of 25 years is negotiated. Payments will be made monthly in arrears. What will be the loan balance at the end of: Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 5,432.16))
a. 1 year?
b. 10 years?
a. How much principal and interest will be paid in year 2?
b. How much principal and interest will be paid in year 7?
1b. You have just taken out a 9-year 8% business loan for $25,000 requiring quarterly payments. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 5,432.16))Explanation / Answer
1 FV = 0, PV = 150,000, rate = 7%/12, N = 300
use PMT function in Excel
monthly payment = 1060.1688
now replace N with 12
a. balance after 1 year = 147,705.28
replace N with 120
b. balance after 10 years = 117,950.09
1b.
a. N = 36, FV = 0, rate = 2%, PV = 25,000
quarterly payments = 980.8213
a. put N = 4 and find value of loan after a year = 23,018.2430
put N = 8 and find value of loan after 2 year = 20,873.1255
principal paid = 23,018.2430 - 20,873.1255 = 2145.12
interest = 4*980.8213 - 2145.12 = 1,778.17
b.
put N = 24 and find value of loan after 6 year = 10,372.5201
put N = 28 and find value of loan after 7 year = 7,184.9883
principal paid = 3,187.53
interest = 4*980.8213 - 3187.53 = 735.75
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