Question

Two loans, both of an amount of 720,000 are repaid at a nominal
interest

rate of 19.2% convertible monthly. Loan 1 is to be repaid with 360
level monthly

payments. Loan 2 is to be repaid by 360 monthly payments, each
containing

equal principal amounts and an interest amount based on the unpaid
balance.

Payments are made at the end of each month for both loans. The
monthly

payment for Loan 1 first exceeds the monthly payment for Loan 2
with the

kth payment. For Loan 2, what is the total interest paid in the
last 360-k payments?

(a) 1,389,923

(b) 1,416, 096

(c) 1,432,035

(d) 1,581,764

(e) 1,590,370

Answer #1

1. **Monthly Payment in Loan 1 = 720000 / PVAF(1.60%,360)
= 720000 / 62.29 = $11558.12**

2. Monthly Payment in Loan 2 = 720000/360 + Interest

the interest of month in Loan 2 where Loan 1 exceeds Loan 2

Loan 1 > Loan 2

11558.12 > (2000 + Interest)

**Interest < $9558.12**

**Loan Balance of Loan 2 at Interest = $9558.12 / 0.016 =
597382.50**

**Payment made till $597382.50 = (720000 - 597382.50)/2000
= 61**

**Interest for 62nd payment for Loan 2 = ($720000 -
122000) * 0.192/12 = $9568**

**Now the interest amount will decrease with next payment
by $32 (2000 * 0.192/12)**

Thus Total Interest = 62nd Interest * (360 - k) - Sum of 32 ,64 .... (Arithmetic progression)

Thus Total Interest = 9568 * (360 - 61) - 1425632

**Thus Total Interest = $1435200 Option C is the nearest
choice**

**Please dont forget to upvote**

A 100,000 loan is being repaid in 360 monthly installments at a
9% nominal annual interest rate compounded monthly. The first
payment is due at the end of the first month. Determine which
payment is the first where the amount of principal repaid exceeds
the amount of interest paid.
266th
267th
268th
269th
270th

A loan is repaid with monthly payments for five years, the
payments beginning exactly one year after the loan is made. The
payments are each $1,000 in the monthly payments. If the interest
rate on the loan is a nominal rate of 6% convertible monthly find
the amount of principal in the 42nd paymen

Personal finance loans, such as home loans, can be split into
two broad categories: 1. Interest-only (debt repayment is
interested only) 2. Amortizing loans. (debt repayment is both
interest and principal) Amortizing loans typically involved fixed
repayments that can be valued with the ordinary annuity formula.
Which of the following statements about the payments of a long-term
amortized loan is true? Select one or more:
a. At the end of the loan, principal = interest
b. At the start of...

Which of the following is true when comparing two loans for the
same amount of money at the same interest rate for the same amount
of time, but with different payment frequencies?
Group of answer choices
Annual payments are less than the total of a year's worth of
monthly payments
Total interest paid in a year for a loan with monthly payments
is less than the total interest paid in a year for a loan with
annual payments
Total principal...

Eve borrows 10,000. The loan is being repaid with the following
sequence of monthly payments: 100, 150, 100, 150, 100, 150, etc.
The annual nominal interest rate is 7.8% payable monthly. Calculate
the amount of principal repaid in the 13th payment.

Consider an amortizing loan. The amount borrowed initially is
$21618, the interest rate is 5% APR, and the loan is to be repaid
in equal monthly payments over 17 years. As we know, while each
monthly payment will be the same, the amounts of interest and
principle paid will change from payment to payment. How much of the
very first payment is interest?

Janelle receives a home improvement loan of $14,503.90. The loan
has a nominal interest rate convertible monthly of 4.9%. The term
of the loan is two years and Janelle is expected to make level
end-of-month payments, except that she is allowed to miss one
payment so long as she then pays higher level payments for the
remainder of the two years, so as to have repaid the loan at the
end of the two-year period. Suppose Janelle misses the payment...

An investor borrows an amount at an annual effective interest
rate of 5% and will repay all interest and principal in a lump sum
at the end of 20 years. She uses the amount borrowed to purchase a
10,000 par value 20-year bond with 8% semiannual coupons bought to
yield 6% convertible semiannually. All coupon payments are
reinvested at a nominal rate of 6% convertible semiannually.
Calculate the net gain to the investor at the end of 20 years after...

A loan of 20,000 is being repaid by 20 annual payments at the
end of year, each includes equal repayment of the principal along
with the interest at 5% effective on the unpaid loan balance. After
receiving each payment, the lender immediately deposits the payment
into an account bearing interest at an annual rate of 3%. Find the
accumulated value of the account right after the last deposit. The
accumulated value is (in two decimals).

An amortization table reports the amount of interest and
principal contained within each regularly scheduled payment used to
repay an amortized loan.
Example Amortization Schedule
Year
Beginning
Amount
Payment
Interest
Repayment of
Principal
Ending
Balance
1
2
3
Consider the amount of the interest payments included in each of
the payments of an amortized loan. Which of the following
statements regarding the pattern of the interest payments is
true?
The portion of the payment going toward interest is smaller in...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 7 minutes ago

asked 13 minutes ago

asked 13 minutes ago

asked 13 minutes ago

asked 24 minutes ago

asked 44 minutes ago

asked 47 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago