A loan is to be repaid by an annuity payable monthly in arrears over a 5-year period. The annuity starts at a rate of £200 per month and increases each month by £5. Repayments are calculated using a rate of interest of 8% per annum effective. (i) Calculate the amount of the original loan to the nearest £. (ii) (iii) Calculate the capital outstanding at the end of the first year (after the payment due has been made) to the nearest £0.01. Hence, or otherwise, calculate the capital and interest components of the 13th and 14th payments.

A loan is to be repaid by an annuity payable monthly in arrears over a 5-year period. The annuity starts at a rate of £200 per month and increases each month by £5. Repayments are calculated using a rate of interest of 8% per annum effective. (i) Calculate the amount of the original loan to the nearest £. (ii) (iii) Calculate the capital outstanding at the end of the first year (after the payment due has been made) to the nearest £0.01. Hence, or otherwise, calculate the capital and interest components of the 13th and 14th payments.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.17: Amortized Loans

Problem 1ST

See similar textbooks

Similar questions

A loan of £4,000 is to be repaid over 5 years by a level annuity payable monthly in arrears. The amount of the monthly payment is calculated on the basis of an interest rate of 1% per month effective. Find a) The interest paid in the first month b)The repaid capital c)In the last month, the interest paid and the capital repaid
A loan of £4,000 is to be repaid over 5 years by a level annuity payable monthly in arrears. The amount of the monthly payment is calculated on the basis of an interest rate of 1% per month effective. Find the total capital repaid and interest paid in the first and last month, respectively. Answer: The interest paid in the first month is a) £4000x1.01= £4040 b) £4000x(1-exp(-0.01))=£39.807 c)£4000x0.01= £40 d)£4000x0.12= £480 The repaid capital is a)£0.535 b)£48.9778 c)£49.1771 d)£587.734 In the last month, the interest paid is a)£ 0.00535 b)£0.489778 c) £0.889778 d)0.491771 In the last month, the capital repaid is a)£479.645 b)£431.358 c)£88.088 d)39.8007 They are multiple-choice questions
A loan of £97,550 is repayable by an annuity payable annually in arrears for 17 years. After the first repayment instalment, subsequent repayment instalments are to be increased by £300 each year. The repayment instalments were calculated using a rate of interest of 5.3% per annum effective. (i) Calculate, to 2 decimal places, the amount of the first repayment instalment: (ii) Calculate, to 2 decimal places, the loan outstanding after the first 10 payments: £ (iii) Immediately after the 10th repayment instalment, the interest rate on the outstanding loan is increased to 6.7% per annum effective and future instalments are kept level, equal to the instalment amount paid at the end of the 10th year. (a) Calculate the adjusted remaining term of the new loan (in whole years): (b) Calculate, to 2 decimal places, the amount of repayment (X) made in the final year: £
A loan of £10,000 is repaid in 5 years with quarterly payments made in arrears. The initial payment is of amount P and subsequent payments increase at the end of every year by 2% p.a. compound. The interest rate is 6% p.a. effective. (a) Find the value of P. (b) What is the outstanding balance at the start of the final year? (c) What is the interest component of the first payment in the final year?
A loan of £70,000 is repaid in 18 annual instalments of £6,400,with the first repayment due in one year.What is the interest rate?
A loan can be repaid in two ways: (i) a perpetuity-due with annual payment $1000; (ii) a 3-year deferred annuity-immediate with 10 annual payments of $Q. Calculate Q if the annual effective interest rate is 7%.
a. Set up an amortization schedule for a $19,000 loan to be repaid in equal installments atthe end of each of the next 3 years. The interest rate is 8% compounded annually.b. What percentage of the payment represents interest and what percentage representsprincipal for each of the 3 years? Why do these percentages change over time?
Prepare an amortization schedule for a three-year loan of $96,000. The interest rate is 9 percent per year, and the loan calls for equal annual payments. How much total interest is paid over the life of the loan? Year 1: Beginning Balance, Total Payment, Interest Payment, Principal Payment, Ending balance Year 2: Beginning Balance, Total Payment, Interest Payment, Principal Payment, Ending balance Year 3: Beginning Balance, Total Payment, Interest Payment, Principal Payment, Ending balance Total Interest for all 3 Years.
The effective rate of interest is 6% per annum. An annuity is payable annually in arrears for 25 years, where the first payment is £10,000 and the payments increase by £2,000 each year. i) Calculate the present value of this annuity. ii) Calculate the value of this annuity at the end of the payment stream.
A loan of $92,800.00 is repaid by equal payments made at the end of every three months for 3 years. If interest is 8% compounded quarterly, find the size of the quarterly payments and construct an amortization schedule showing the payment number, amount paid, interest paid, principal repaid and outstanding principal balance of each payment. Additionally, include the totals for amount paid, interest paid and principal repaid of the loan.
Set up an amortization schedule for a Rs 100,000 loan to be repaid in equalinstallments at the end of each of the next 5 years. The interest rate is 10%compounded annually. b. What percentage of the payment represents interest and what percentage represent principal for each of the 5 years? Why do these percentages change over time?
1. A loan of P12, 500 is to be repaid with equal quarterly payments for one year with an interest of 6% compounded quarterly. Find the quarterly payment and construct an amortization schedule.