2. Sarah purchased a machine for $28,000 for her company. She paid 5.00% of this amount as a down payment and financed the rest at 4.42% compounded monthly. She paid $1,125 at the end of every month to settle the loan. a. What was the principal portion of payment number 4? b. What was the interest portion of payment number 4?

2. Sarah purchased a machine for $28,000 for her company. She paid 5.00% of this amount as a down payment and financed the rest at 4.42% compounded monthly. She paid $1,125 at the end of every month to settle the loan. a. What was the principal portion of payment number 4? b. What was the interest portion of payment number 4?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 25PROB

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

100%

round answers to the nearest cent

2. Sarah purchased a machine for $28,000 for her company. She paid 5.00% of this amount as a down
payment and financed the rest at 4.42% compounded monthly. She paid $1,125 at the end of every
month to settle the loan.
a. What was the principal portion of payment number 4?
b. What was the interest portion of payment number 4?

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