Question

On 1st January 2020, a loan was issued and it was amortized over 20 years with monthly payments at a nominal interest rate of 8.4% compounded monthly. The first payment was paid on 1st February 2020. The loan is structured in such a way that the first 120 installments will be paid in equal installments of N$6000 and the next 120 installments will be paid in such a way that each succeeding monthly payment will be 3% lower than the previous month. Calculate the outstanding loan balance immediately after the 160th payment is made. What is the value of the loan today?

Answer #1

The loan has total 20*12 = 240 payments and first 120 payments are of N$6000 each and then in each of the months from month 121 to 240 , payments are 3% lesser than the previous month i.e. each payment will be 0.97 times the previous payment

Monthly interest rate = 8.4%/12 = 0.007

Present value of the loan = 6000/0.007*(1-1/1.007^120)+ 6000*0.97/1.007^121+6000*0.97^2/1.007^122+.....+6000*0.97^120/1.007^240

= 486020.82 + 6000*0.97/1.007^121*(1-(0.97/1.007)^120)/(1-0.97/1.007)

=486020.82+67343.38

**=N$ 553364.20 which is the value of the loan
today**

Loan balance immediately after 160th payment

= value of loan payments from month 161-240 at the time of month 160

= 6000*0.97^41/1.007 +6000*0.97^42/1.007^2 +6000*0.97^43/1.007^3 +...+6000*0.97^120/1.007^80

= 6000*0.97^41/1.007*(1-(0.97/1.007)^80)/(1-0.97/1.007)

=**N$ 44186.80**

You have just taken out an amortized loan for $404,000. Assume
that the loan will be paid in 24 equal monthly installments of
$18,345.62 and that the first payment will be due 1 month from
today. How much of your third monthly payment will go toward the
repayment of principal? Fill in the worksheet below.
Month
Interest Owing
at End of Month ($)
Principal Repayment ($)
Principal Owing
at End of Month ($)
1
2
3

We entered into a 2 year loan on January 1st for
$100,000 at 5% compounded monthly with a monthly payment of
$13,397. What would the monthly interest and principal amounts for
the first two months?

An $600,000 Mortgage is amortized by monthly payments over 25
years. The interest rate charged is 4% compounded
semi-annually.
1.What is the size of the monthly payment to the nearest
dollars?
2.How much interest paid in the first payment?
3.What is the outstanding balance after the first
payment?

Number of years= 20
Number of months=240
Annual Percentage Rate=8.00%
Monthly interest rate=0.67%
Loan amount=$441,747
Fixed monthly repayment amount=$ 3,694.95
1. The borrower actually had to pay $250 more each month due to
hidden fees and charges. Calculate the implied nominal interest
rate compounded monthly, the borrower is actually charged on the
loan taking into account these charges
2. Total amount of interest paid in the 3rd year?
3. The total principle paid in the 4th year?
4. The amount...

On 1st January 2020
Tom Shanks started trading as Shanks Real Estate, and completed the
following transactions regarding the business in the first
month:
Jan 1: Tom Shanks transferred cash from his personal
bank account to the business bank account in order to start
operations, $25,000.
Jan 4: The business paid a year’s rent in advance for
office space, $11,880
Jan 5: The business purchased a motor vehicle, $22,000.
A deposit of $6,000 was paid with the remainder financed by...

On January 1, 2020, Larkspur Inc. issued $580,000 of 4-year, 4%
bonds to yield a market interest rate of 5%. Interest is paid every
quarter on January 1, April 1, July 1, and October 1. Larkspur has
a calendar year end.
Prepare a bond amortization schedule for the first two years (8
interest periods). (Round answers to 0 decimal places,
e.g. 5,276.)
LARKSPUR INC.
Bond Discount Amortization Schedule
Effective-Interest Method
Semi-Annual Interest
Period
Interest Payment
Interest Expense
Amortization
Bond Amortized...

Topic : Time value money
Subject : Engineering Economics
Today is January 1st 2020 (Year 0), Dr. Sid decided to purchase
a 2009 Ducati Sport 1000 from the film Tron Legacy on January 2024.
The price for 2009 Ducati Sport 1000 today is $70,000 (without
road-tax). The price is expected to increase by 10% every year by
taking into consideration the interest rate or/inflation since it
is a collectors’ items.
i. Determine the price of the 2009 Ducati Sport 1000...

On January 1, 2020, Samsung Corporation has 400,000 shares of $3
par value common stock outstanding. On the same date the
corporation’s board of directors declares a 12% stock dividend to
be issue on March 2, 2020. On the declaration date, the
corporation’s common stock fair market value is $4. On declaration
date, the corporation will record: *
Debit Stock Dividend $144,000
Debit Stock Dividend $192,000
Credit Stock Dividend $144,000
Credit Stock Dividend $192,000
A Company has 30,000 shares of...

JOURNAL ENTRIES OF:
January 3
Employees are paid monthly on the first business day of the
month for work done in the previous month. (Ignore payroll taxes
for this assignment.) Accounting wrote and distributed the
paychecks.
GBI received $60,000 in safety product inventory and $40,000 in
raw materials from Dallas Bike Basics. This inventory was ordered
on December 28. The payment terms for the invoice total of $100,000
are net 10 days. GBI paid the CWX shipping company $1400 with...

Suppose today is Dec 31st, 2020, and as always, today is time
t=0. Prithu wants to buy a $20 million yacht. The dealer is
offering the following scheme. Pay $2 million as down payment today
and borrow $18 million from the dealership at 18% per year and
payoff the loan in 4 yearly installments, the first installment is
due one year from now, meaning December 31, 2021. If he agrees to
the scheme, he will receive the delivery of the...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 1 minute ago

asked 4 minutes ago

asked 4 minutes ago

asked 7 minutes ago

asked 10 minutes ago

asked 11 minutes ago

asked 11 minutes ago

asked 11 minutes ago

asked 12 minutes ago

asked 13 minutes ago

asked 14 minutes ago

asked 14 minutes ago