Question

Micro Brewery borrows $330,000 to be repaid in equal installments over a period of six years....

Micro Brewery borrows $330,000 to be repaid in equal installments over a period of six years. The loan payments are semiannual with the first payment due in six months, and interest is at 6%. What is the amount of each payment?

a. $33,152.

b. $27,500.

c. $32,187.

d. $28,325.

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Homework Answers

Answer #1

A. 33,152.

Formula

The EMI Amount can be known by using present value annuity formula. Annuity is flow of equal payments

Present value formula = R(1 - (1+i) power minus n / I.

Present value $330,000.

I = 6/100 = 0.06

n = 6.

R = EMI

As it semi annual we have divide i i.e. 0.06 by 2 and we have multiple n with 2.

$330,000 = R [ 1 - ( 1 + I) power minus / I ]

$330,000 = R [ 1 - (1+0.03 ) POWER MINUS 12 / 0.03

$ 330,000 = R 9.95

R = 330,000 /9.95 Refer note

R = 33,152.

Note

1 - 0.7014 by simplifying above equation / 0.03

0.2986 /0.03

9.95

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