Question

# Time remaining: 1:52:42   19. Midtown Enterprises borrowed \$100,000 for 5 years at a 12 percent interest...

Time remaining: 1:52:42

19.

Midtown Enterprises borrowed \$100,000 for 5 years at a 12 percent interest rate, compounded monthly, and makes an equal amount of payment at the end of each month. How much principal payment is the firm making during the 2nd year?

\$17,498

\$11,164

\$13,420

\$15,447

18,970

 PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)] C = Cash flow per period i = interest rate n = number of payments 100000= Cash Flow*((1-(1+ 12/1200)^(-5*12))/(12/1200)) Cash Flow = 2224.44

Principal paid in 2nd year = PV of remaining CF in 1 year-PV of remaining CF in 2 year

 PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)] C = Cash flow per period i = interest rate n = number of payments PV= 2224.44*((1-(1+ 12/1200)^(-4*12))/(12/1200)) PV = 84470.79
 PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)] C = Cash flow per period i = interest rate n = number of payments PV= 2224.44*((1-(1+ 12/1200)^(-3*12))/(12/1200)) PV = 66972.34

Principal paid = 84470.79-66972.34=17498

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