1) You are about to borrow $12,000 from a bank at an interest rate of 10% compounded annually. You are required to make eight equal annual repayments in the amount of $2,249.33 per year, with the first repayment occurring at the end of year 1. For each year, show the interest payment and principal payment.
1) You are about to borrow $12,000 from a bank at an interest rate of 10% compounded annually. You are required to make eight equal annual repayments in the amount of $2,249.33 per year, with the first repayment occurring at the end of year 1. For each year, show the interest payment and principal payment.
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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Transcribed Image Text:On paper:
1. Dissect the problems (P, i, N, F),
2. Draw cash flow diagrams,
3. Write Factor Notations and make calculations using a calculator,
4. Upload the document to the course page.
1) You are about to borrow $12,000 from a bank at an interest rate of 10% compounded annually. You are required
to make eight equal annual repayments in the amount of $2,249.33 per year, with the first repayment occurring
at the end of year 1. For each year, show the interest payment and principal payment.
2) What value of C makes these two cash flows equivalent at an interest rate of 6%?
$85
0
$50 $50
1
2
3
$85
4
0
1
2C 2C
A
I
1
2
I
I
i
3
C
A
4
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