$255,000 is borrowed to purchase a block of land. It is to be repaid with monthly repayments at 4.2% interest over 25 years: (HINT: Use AMORT on your calculator)   (a)  Calculate the monthly repayments. (b)  How much interest is paid over the life of the loan? (c)  How much is still owed at the end of 10 years?

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
icon
Related questions
Question

  $255,000 is borrowed to purchase a block of land. It is to be repaid with monthly

repayments at 4.2% interest over 25 years: (HINT: Use AMORT on your calculator)

 

(a)  Calculate the monthly repayments.

(b)  How much interest is paid over the life of the loan?

(c)  How much is still owed at the end of 10 years?

 

Expert Solution
Step 1 General Introduction

Present value of the annuity

An annuity is a series of equal payments at an equal intervals over a specified period.

With periodic interest rate (r), period (n) and annuity (PMT), the present value is calculated as shown below.

Present value of annuity=PMT×1-11+rnr

 

 

steps

Step by step

Solved in 6 steps

Blurred answer
Knowledge Booster
Rate Of Return
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education