A company borrows $159,600 from a bank. The interest rate on the loan is 6 percent compounded semiannualy. The company agrees o repay the loan in equal semiannualy installments over the next five years. The first payment is to be made six months from now. Use factor table in Appendix B for calculation) Required 1: What is the amount of each semiannual payment? $ Required 2: In the first payment, what is the amount of interest cancelled? $ Required 3: In the fifth payment, what is the amount of loan paid net of interest? S Required 4: In the last payment, what is the amount of interest cancelled? $ Required 5: Assume the debt contract has the option to make one extraordinary payment of up to 20% of the principal. If the company Mecides to exercise the right and make the extra payment together with the 8th payment, how much it must pay in dollars at the 9th ayment to pay off the loan? S

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
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A company borrows $159,600 from a bank. The interest rate on the loan is 6 percent compounded semiannualy. The company agrees
to repay the loan in equal semiannualy installments over the next five years. The first payment is to be made six months from now.
(Use factor table in Appendix B for calculation)
Required 1: What is the amount of each semiannual payment? $
Required 2: In the first payment, what is the amount of interest cancelled? $
Required 3: In the fifth payment, what is the amount of loan paid net of interest? $
Required 4: In the last payment, what is the amount of interest cancelled? $
Required 5: Assume the debt contract has the option to make one extraordinary payment of up to 20% of the principal. If the company
decides to exercise the right and make the extra payment together with the 8th payment, how much it must pay in dollars at the 9th
payment to pay off the loan? $
Transcribed Image Text:A company borrows $159,600 from a bank. The interest rate on the loan is 6 percent compounded semiannualy. The company agrees to repay the loan in equal semiannualy installments over the next five years. The first payment is to be made six months from now. (Use factor table in Appendix B for calculation) Required 1: What is the amount of each semiannual payment? $ Required 2: In the first payment, what is the amount of interest cancelled? $ Required 3: In the fifth payment, what is the amount of loan paid net of interest? $ Required 4: In the last payment, what is the amount of interest cancelled? $ Required 5: Assume the debt contract has the option to make one extraordinary payment of up to 20% of the principal. If the company decides to exercise the right and make the extra payment together with the 8th payment, how much it must pay in dollars at the 9th payment to pay off the loan? $
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