Question

Nicola borrows a $24000 loan from Steve. She agrees to pay interest on the loan at the end of each year for 8 years, and will repay the capital by accumulation of a sinking fund. The sinking fund deposits are such that the net amount of the loan decreases linearly, resulting in a level repayment of principal at the end of each year. The interest rate on the loan is 5% over the first 4 years and 4.5% over the next 4 years. The sinking fund earns a fixed 4% interest rate per annum.

(a) Find the total amount of the 5th installment paid by Nicola. (Ans. $3600)

(b) Compare this with the case when Nicola repays the loan with 8 equal annual installments.

Answer #1

Principle amount repayment/year will be=24000/8=3000/yr

Year | Amount o/s | Interest(5%/4.5% | Total | Repayment amount | Balance |

1 | 24000 | 1200 | 25200 | 4200 | 21000 |

2 | 21000 | 1050 | 22050 | 4050 | 18000 |

3 | 18000 | 900 | 18900 | 3900 | 15000 |

4 | 15000 | 750 | 15750 | 3750 | 12000 |

5 | 12000 | 540 | 12540 | 3540 | 9000 |

6 | 9000 | 405 | 9405 | 3405 | 6000 |

7 | 6000 | 270 | 6270 | 3270 | 3000 |

8 | 3000 | 135 | 3135 | 3135 | 0 |

Total | 29250 |

b) when Nicola repays the loan with 8 equal annual installments.=29250/8=3656.25/installment

Difference between two=3656.25-3540=116.25

Jill borrows $29,000 from you today. She agrees to repay you in
two equal amounts, the first to occur in 3 years from today and the
other in 7 years from today. If the interest rate is 14.6% per
annum compounding monthly, what will be the amount of each
repayment?

A company borrows $160000, which will be paid back to the lender
in one payment at the end of 8 years. The company agrees to pay
monthly interest payments at the nominal annual rate of 11%
compounded monthly. At the same time the company sets up a sinking
fund in order to repay the loan at the end of 8 years. The sinking
fund pays interest at an annual nominal interest rate of 15%
compounded monthly. Find the total amount...

Brian borrows $15,000 from Mary and agrees to repay with 12
installments payable half-yearly. The effective interest rate is
6.09% per annum. When the 6th payment is due, Brian repays the
outstanding loan balance by a lump sum.
a.) Calculate the lump sum payment of Brian
b.) Calculate the loss of interest income of Mary
Please show all work by hand, without using a finance calculator
or Excel. Thank you.

A company borrows $140000, which will be paid back to the lender
in one payment at the end of 12 years. The company agrees to pay
semi-annually interest payments at the nominal annual rate of 13%
compounded semi-annually. At the same time the company sets up a
sinking fund in order to repay the loan at the end of 12 years. The
sinking fund pays interest at an annual nominal interest rate of 8%
compounded semi-annually. Find the total amount...

A company borrows $170000, which will be paid back to the lender
in one payment at the end of 6 years. The company agrees to pay
yearly interest payments at the nominal annual rate of 13%
compounded yearly. At the same time the company sets up a sinking
fund in order to repay the loan at the end of 6 years. The sinking
fund pays interest at an annual nominal interest rate of 5%
compounded yearly. Find the total amount...

A manufacture borrows P2,843,737 with interest at 8%
compounded monthly, and agrees to discharge the loan by a sequence
of equal monthly payments for 5 years with the first payment at the
beginning of the 4th year. Find the periodic payment.
DEFERRED ANNUITY.

3) A friend borrows $4000 from you, agreeing to pay 4.55% simple
interest. The loan plus interest is to be paid back after 30
months. When the loan is repaid how much will be the interest
portion of the repayment? What will the total repayment be,
including interest and the principal?
4) You invested $10,000 In a CD that offers 4 1/4% rate
compounded monthly. How much will you have in a CD after 6 years
and 3 months? What...

Jill borrows $300,000 for 10 years at a fixed interest rate of i
% p.a (EAR). If the loan is repaid in 10 equal year-end payments
over the 10 years, the amount of the loan outstanding at the end of
the 5th year will be:

Question 1
Jack took a $ 5,000 loan, which he repaid in
monthly installments over seven
months. Payments were always made at the end of
the month (each payment month was 1/12 part of the year)
so that the first repayment was made 4 months after the loan was
drawn down. Each equal installment consisted of an installment of
the loan amount of $ 5,000 / 7 and an interest component of $ 30
and an account management fee of...

Encik Ramli borrows RM20,000 and will repay the loan under a
25-year annuity immediate payments. The annual repayment is
calculated at an effective interest rate of 8% with increment of
RM50 each year.
(i) Calculate the amount of the first payment.
(ii) Calculate the outstanding balance after the first three
payments have been made.
(iii) Explain your answer to part (ii)
(iv) Calculate the total amount of interest paid over the term
of the loan.

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 9 minutes ago

asked 10 minutes ago

asked 10 minutes ago

asked 11 minutes ago

asked 13 minutes ago

asked 23 minutes ago

asked 27 minutes ago

asked 27 minutes ago

asked 31 minutes ago

asked 31 minutes ago

asked 33 minutes ago

asked 35 minutes ago