Question

Your Uncle Bob has arranged a loan at the Bank for $1,000 which he will repay...

Your Uncle Bob has arranged a loan at the Bank for $1,000 which he will repay in 10 equal annual payments at a 10% interest rate. Immediately after his 3rd payment, he calls the banker to enquire about borrowing another $500. He tells the banker that he can’t afford for the payment to go up too dramatically and he offers to let him repay the remaining debt on the original loan plus the new $500 loan in 12 equal annual payments. The first payment will be at the end of one year and the interest rate is unchanged at10%. Bob says he will think about it and then comes to you asking if you can tell him how much his new payment will be. What is the amount of the 12 new payments?

Homework Answers

Answer #1

Annual installment in case of first loan will be :

= Loan amout/PVIFA(10%,10 years)

1000/6.145

= $162.73

Computation of principle amount repaid in 3 years:

end of 1st year = Installment amount - interest amount

= 162.73 - (1000*10%)

= $ 62.73

end of 2nd year = 162.73 - [(1000-62.73)*10%]

= $ 69

end of 3rd year = 162.73 - [(1000-62.73-69)*10%]

= $ 75.90

Hence the remaining principle amount after 3rd installemnt = $792.37

Additional loan taken = $500

total loan amount = $ 1292.37

Annual installment amount = loan amount/PVIFA(10%,12 years)

= 1292.37/6.814

=$189.66 (approx)

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Sang just took out a loan from the bank for 67,668 dollars. He plans to repay...
Sang just took out a loan from the bank for 67,668 dollars. He plans to repay this loan by making a special payment to the bank of 29,855 dollars in 2 months and by also making equal, regular monthly payments of X. If the interest rate on the loan is 1.35 percent per month, he makes his first regular monthly payment later today, and he makes his last regular monthly payment made in 4 months from today, then what is...
Youssef just took out a loan from the bank for 78,090 dollars. He plans to repay...
Youssef just took out a loan from the bank for 78,090 dollars. He plans to repay this loan by making a special payment to the bank of 19,680 dollars in 2 months and by also making equal, regular monthly payments of X. If the interest rate on the loan is 0.63 percent per month, he makes his first regular monthly payment later today, and he makes his last regular monthly payment made in 4 months from today, then what is...
How much is your loan amount today if you are going to repay using 8 equal...
How much is your loan amount today if you are going to repay using 8 equal quarterly payments of $200 with annual interest of 12 percent but assuming quarterly compounding? $1403.93 Bob has $5,000. He expects to earn 7.5% on his invested funds. How much could he withdraw at the end of each of the next 10 years and end up with zero in the account? $728.43
Angelo Lemay borrowed $8000 from his credit union. He agreed to repay the loan by making...
Angelo Lemay borrowed $8000 from his credit union. He agreed to repay the loan by making equal monthly payments for five years. Interest is 9% compounded monthly. (Please use financial BAII calculator method by showing calculator inputs) (a) What is the size of the monthly payments? (b) How much will the loan cost him? (c) How much will Angelo owe after 18 months? (d) How much interest will he pay in his 36th payment? (e) How much of the principal...
1) Jens just took out a loan from the bank for 79,702 dollars. He plans to...
1) Jens just took out a loan from the bank for 79,702 dollars. He plans to repay this loan by making a special payment to the bank of 4,130 dollars in 4 years and by also making equal, regular annual payments of X for 8 years. If the interest rate on the loan is 12.57 percent per year and he makes his first regular annual payment in 1 year, then what is X, Jens’s regular annual payment? 2) Theo just...
The owner of a small business borrowed $137548 with an agreement to repay the loan with...
The owner of a small business borrowed $137548 with an agreement to repay the loan with quarterly payments over a 5 year time period. If the interest rate is 12% per year compounded quarterly, his loan payment each quarter is equal to:
Alex just took out a personal loan of $34,000. To repay the loan, he has to...
Alex just took out a personal loan of $34,000. To repay the loan, he has to make equal quarterly repayments for 9 years to the bank. The bank charges an annual percentage rate (APR) of 9% compounded quarterly. How large must each of the quarterly payments be?.
Shahad has jat arranged a $20,000 loan from your bank at an annual rate of 10%....
Shahad has jat arranged a $20,000 loan from your bank at an annual rate of 10%. The loan calls for annual payments of $1,000 over the next 14 years and a final payment at the end of year 15. How big will the final payment (balloon) be ?
A man has borrowed $10,000 which he will repay in 60 equal monthly installments. After his...
A man has borrowed $10,000 which he will repay in 60 equal monthly installments. After his twenty-fifth payment he desires to pay the remainder of the loan at the time of the 26th payment in a single payment. At an interest rate of 2% per month what is the amount of the payment?
Kirk has a 4.5 year loan of $50,000 with St George Bank. He plans to repay...
Kirk has a 4.5 year loan of $50,000 with St George Bank. He plans to repay the loan in 9 equal semi-annual instalments starting today. If the rate of interest is 8.4% p.a. compounding semi-annually, how much will each repayment be worth? Select one: a. $6,481.73 b. $6,352.98 c. $6,280.74 d. $6,104.08
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT