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 monthly repayment. Answer: We use months as unit of time. Then, if x is the monthly repayment, £4000 = (blank) Thus x= (blank) Next part: Find the total capital repaid and interest paid in the first and last month, respectively. Answer: The interest paid in the first month is (blank). The repaid capital is (blank). In the last month the interest paid is (blank) and the capital repaid is (blank). Next part: Find the amount of the loan that has been repaid after 30 months. Answer: The loan outstanding after 30 months is (blank). Hence (blank) has been repaid at that point in time.

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 monthly repayment. Answer: We use months as unit of time. Then, if x is the monthly repayment, £4000 = (blank) Thus x= (blank) Next part: Find the total capital repaid and interest paid in the first and last month, respectively. Answer: The interest paid in the first month is (blank). The repaid capital is (blank). In the last month the interest paid is (blank) and the capital repaid is (blank). Next part: Find the amount of the loan that has been repaid after 30 months. Answer: The loan outstanding after 30 months is (blank). Hence (blank) has been repaid at that point in time.

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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