2. At the beginning of his musical career, John Lemon took out a $3,750,000 5-year-loan to build a recording studio in his home. The loan had an interest rate of 10.35%. a. Suppose John decided to repay the loan in 5 years by making equal annual end-of year payments. Determine John’s annual loan payment and build an amortization table for the loan. b. How much will John pay in interest over the life of the loan if he makes equal annual end of year payments? c. Suppose instead, John decided to pay $750,000 in principal every year, as a fixed amount. Build an amortization table for the loan.
2. At the beginning of his musical career, John Lemon took out a $3,750,000 5-year-loan to build a recording studio in his home. The loan had an interest rate of 10.35%. a. Suppose John decided to repay the loan in 5 years by making equal annual end-of year payments. Determine John’s annual loan payment and build an amortization table for the loan. b. How much will John pay in interest over the life of the loan if he makes equal annual end of year payments? c. Suppose instead, John decided to pay $750,000 in principal every year, as a fixed amount. Build an amortization table for the loan.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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2. At the beginning of his musical career, John Lemon took out a $3,750,000 5-year-loan to build a recording studio in his home. The loan had an interest rate of 10.35%.
a. Suppose John decided to repay the loan in 5 years by making equal annual end-of year payments. Determine John’s annual loan payment and build an amortization table for the loan.
b. How much will John pay in interest over the life of the loan if he makes equal annual end of year payments?
c. Suppose instead, John decided to pay $750,000 in principal every year, as a fixed amount. Build an amortization table for the loan.
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