a. How much is the monthly loan repayment amount? b. If you double your loan repayment each month for the first year, how long will it take to repay the loan? E.g., you double your loan payment amount from part (a) for the first twelve months only, t=1, t=2, ..., t=12. 17

a. How much is the monthly loan repayment amount? b. If you double your loan repayment each month for the first year, how long will it take to repay the loan? E.g., you double your loan payment amount from part (a) for the first twelve months only, t=1, t=2, ..., t=12. 17

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.17: Amortized Loans

Problem 1ST

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

19) Special Loan

You take out a $100,000 loan to buy a new yacht. The annual loan rate is ? = 0.04 and the loan period is ? = 10.

a. How much is the monthly loan repayment amount?

b. If you double your loan repayment each month for the first year, how long will it take to repay the loan? E.g., you double your loan payment amount from part (a) for the first twelve months only, t=1, t=2, ..., t=12. 17)

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