Borrow $5,000,000 from a bank quoted an annual interest rate of 3.8%, do monthly payments during the payback period of 6 years. Find periodic and annual payments, also cumulative interest and cumulative principal.
Borrow $5,000,000 from a bank quoted an annual interest rate of 3.8%, do monthly payments during the payback period of 6 years. Find periodic and annual payments, also cumulative interest and cumulative principal.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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If you could solve Option 2 with formulas that would be great!
Option 2: Borrow $5,000,000 from a bank quoted an annual interest rate of 3.8%, do monthly payments during the payback period of 6 years. Find periodic and annual payments, also cumulative interest and cumulative principal.
Transcribed Image Text:Future
Present Value Annual Interest
Duration in
Periodic Payment
Value
Annual
Cumulative
Cumulative
Option
(PV)
Rate
Years
Periods/ Year
(PMT)
(FV)
Payments
Interest
Principal
Option 1: $4,600,000 loan at 3.5% APR.
Bimonthly for 5 years.
Option 2: $5,000,000 loan at 3.8% APR.
Monthly for 6 years.
Option 3: $5,000,000 loan at 3.4% APR.
Quarterly payments of $400,000
Option 4: $150,000/month from store revenue
for 10 months. 2.5% opportunity cost lost.
Option 4: Finance the balance, $3,500,000
from the bank at 3.4% quarterly for 5 years.
Option 5: $2,500,000 from investment
account. 3% opportunity cost lost for 10
months.
Option 5: $2,500,000 from the bank at 4.0%
paid back monthly for 3 years
Transcribed Image Text:Option 2
Loan
APR
Periods/year
Payments (year)
Future value of loan
Period
Interest
Principal
Balance
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