1.3 7. A person borrows $5,000 at an annual interest rate of 18%, compounded monthly.Monthly payments of $167.10 were agreed upon. What is the length of the loan?8. On the day that his son is born, a father wishes to determine what lump sum amountwould have to be paid into an account bearing interest of 12% per year to providewithdrawals of $2,000 on each of the son's 18th, 19th, 20th, and 21st birthday. What isthe amount of the lump sum that the father needs to deposit on the day of his son'sbirth?

The concept of time value of money will be used and applied here. A person, when he or she borrows…

Answered: 7. A person borrows $5,000 at an annual…

7. A person borrows $5,000 at an annual interest rate of 18%, compounded monthly. Monthly payments of $167.10 were agreed upon. What is the length of the loan?

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications

Section: Chapter Questions

Problem 13E

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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

1.3

7. A person borrows $5,000 at an annual interest rate of 18%, compounded monthly.
Monthly payments of $167.10 were agreed upon. What is the length of the loan?
8. On the day that his son is born, a father wishes to determine what lump sum amount
would have to be paid into an account bearing interest of 12% per year to provide
withdrawals of $2,000 on each of the son's 18th, 19th, 20th, and 21st birthday. What is
the amount of the lump sum that the father needs to deposit on the day of his son's
birth?

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