Consider a car Loan of $ 20,000 to be repaid over 5 years in monthly installments. Annual Interest Rate = 6 % all detailed formulas should be shown, Financial Calculator not allowed. a) Calculate the value of each monthly payment applying the flat rate method. b) Calculate the value of each monthly payment if interest is declining. c) Calculate the $ difference of total interest paid during the 5-year period between option (a) and option (b) above. d) Calculate the EAR for option (a)[flat rate method] and for option (b)[declining interest method]
Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
Consider a car Loan of $ 20,000 to be repaid over 5 years in monthly installments. Annual Interest Rate = 6 %
all detailed formulas should be shown, Financial Calculator not allowed.
- a) Calculate the value of each monthly payment applying the flat rate method.
- b) Calculate the value of each monthly payment if interest is declining.
- c) Calculate the $ difference of total interest paid during the 5-year period between option (a) and option (b) above.
- d) Calculate the EAR for option (a)[flat rate method] and for option (b)[declining interest method]
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