Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN: 9780357033609
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 7, Problem 9FPE
Calculating and comparing add-on and simple interest loans. Eli Nelson is borrowing $10,000 for five years at 7 percent. Payments, which are made on a monthly basis, are determined using the add-on method.
- a. How much total interest will Eli pay on the loan if it is held for the full five-year term?
- b. What are Eli’s monthly payments?
- c. How much higher are the monthly payments under the add-on method than under the simple interest method?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Chris Jenkins is borrowing $11,500 for 5 years at 10 percent. Payments are made on a monthly basis, which are determined using the add-on method.
How much total interest will Chris pay on the loan if it is held for the full five-year term?
What are Chris' monthly payments? Round the answer to the nearest cent.
How much higher are the monthly payments under the add-on method than under the simple interest method (determined using a calculator or approximated using Exhibit 7.6)? Round the answer to the nearest cent.
Jason Stein from Topeka, Kansas, borrows $1,500 (including interest) for four years (48 months) at an interest rate of 7% per year. The loan uses the discount method for determining the amount of interest.
How much of the loan amount ($1,500) consists of interest?
How much of the loan is actually given directly to Jason?
What is the monthly payment (rounded to the nearest penny), assuming 48 monthly payments?
Steven Riley is borrowing $9,000 for 5 years at 8 percent. Payments are made on a monthly basis, which are determined using the add-on method.
How much total interest will Steven pay on the loan if it is held for the full 5-year term?
$
What are Steven's monthly payments? Round the answer to the nearest cent.
$ per month
How much higher are the monthly payments under the add-on method than under the simple interest method (determined using a calculator or approximated using Exhibit 7.6)? Round the answer to the nearest cent.
$ per month
Chapter 7 Solutions
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
Knowledge Booster
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
- Calculating interest and APR of installment loan. Assuming that interest is the only finance charge, how much interest would be paid on a 5,000 installment loan to be repaid in 36 monthly installments of 166.10? What is the APR on this loan?arrow_forwardCalculating single-payment loan amount due at maturity. Stanley Price plans to borrow 8,000 for five years. The loan will be repaid with a single payment after five years, and the interest on the loan will be computed using the simple interest method at an annual rate of 6 percent. How much will Stanley have to pay in five years? How much will he have to pay at maturity if hes required to make annual interest payments at the end of each year?arrow_forwardIf Bergen Air Systems takes out a $100,000 loan, with eight equal principal payments due over the next eight years, how much will be accounted for as a current portion of a noncurrent note payable each year?arrow_forward
- Investigate the effect of the interest rate on home loans by finding the monthly payment and the total interest for a twenty-year simple interest amortized loan of $150,000 at the following rates. (Round your answers to the nearest cent.) (a) 6% payment $ total interest $ (b) 7% payment $ total interest $ (c) 8% payment $ total interest $ (d) 9% payment $ total interest $ (e) 10% payment $ total interest $ (f) 11% payment $ total interest $arrow_forwardSol Pine borrows $8,200 for one year at 12 percent interest. What is the effective rate of interest if the loan is discounted?arrow_forwardYou are offered an add-on loan for $4,500 at 18% for 5 years. What is the monthly payment? What is the amount of interest? What is the true interest rate cost of this loan? If you could pay the same loan above at a compound rate: What would the monthly payment be? What would the amount of interest be? Prepare a monthly payment schedule for each loan above using Excel, and submit it. Suppose that you are only allowed to make a balloon payment to the principal of the compound interest loan. You have $1,000 to put down at the beginning of year three. How many payments will you save?arrow_forward
- You borrow $1,000 from the bank and agree to repay the loan over the next year in 12 equal monthly payments of $90. However, the bank also charges you a loan initiation fee of $20 which is taken out of the initial proceeds of the loan. Taking into account the impact of the initiation fee, what is the effective annual interest rate on the loan?arrow_forwardConsider the following loan. Complete parts (a)-(c) below. An individual borrowed $77,000 at an APR of 7% which will be paid off with monthly payments of $562 for 23 years. Identify the amount borrowed, the annual interest rate, the number of payments per year, the loan term, and the payment amount. The amount borrowed is $77,000 The annual interest rate is 7% The number of payments per year is 12 The number of payments per the loan term is 23 year And the payment amount is $562 How many total payments does the loan require? What is the total amount paid over the full term of the loan? There are ___ payments toward the loan and the total amount paid is _____arrow_forwarda. If you borrow $2,200 and agree to repay the loan in five equal annual payments at an interest rate of 12%, what will your payment be? b. What will your payment be if you make the first payment on the loan immediately instead of at the end of the first year?arrow_forward
- Sam takes out a loan for $3,685.50. The term of the loan is 7 years, and she will make bi-weekly payments. The interest rate on the loan is 3.475% compounded monthly. a) What is the effective interest rate per payment period? b) If Sam is going to repay the loan with level payments, what is the monthly payment amount? c) Fill in the first 3 rows of the loan amortization table. d) What would the nominal interest rate (compounded monthly) have to be if the bi-weekly (level) payment amounts were $24.69?arrow_forwardDel Pilar wants to know the effective interest rate of his 310,000 bank loan with interest of 11% compounded quarterly. Find the effective rate. Althea has a loan of 190,000 at ordinary interest of 8% if the amount of interest is 3,800 what would be the the time period of the loan in one year?arrow_forwardFind the interest paid on a loan of $2,700, for three years at a simple interest rate of 12% per year. What is the interest on the loan?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Pfin (with Mindtap, 1 Term Printed Access Card) (...
Finance
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
What is a mortgage; Author: Kris Krohn;https://www.youtube.com/watch?v=CFjY-58ooi0;License: Standard YouTube License, CC-BY
Topic 10 Accounting for Liabilities Mortgage Payable; Author: Accounting Thinker;https://www.youtube.com/watch?v=EPJOphrbArM;License: Standard YouTube License, CC-BY