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Mary’s Manufacturing borrows $100,000 from a bank. The loan has to be repaid over 7 years,...

Mary’s Manufacturing borrows $100,000 from a bank. The loan has to be repaid over 7 years, but the regular payments are calculated as though it were a 14 year loan. Payments are due quarterly. The APR is 12%. What is the regular payment (quarters 1 through 19)? What is the total payment due in the last quarter (quarter 20)?

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Answer #1

Quarterly payment on loan is calculated in excel and screen shot provided below:

Quarterly payment on loan is $3,708.45.

Outstanding balance after 7 year is present value of next 7 year payment. So outstanding balance at end of year 7 is calculated in excel and screen shot provided below:

outstanding balance at end of year 7 is $69,585.71.

Total payment in 28th payment = $69,585.71 + $3,708.45

= $73,294.15

Total payment in 28th payment is $73,294.15.

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