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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

Answer #1

PV_{Ordinary 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

PV_{Ordinary 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 |

PV_{Ordinary 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

26.
Sharpe General Stores borrowed $250,000 for 10 years at a 12
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amount of payment at the end of each quarter. What is the loan
balance remaining after the 3rd year?
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$40,203
$23,420
$29,002
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