A loan of $10,000 is repaid by 20 level installments at the end of every 6 months. The nominal rate of interest is 8%, convertible half yearly. Find the total amount of interest payment made over the 10-year period.
A loan of $10,000 is repaid by 20 level installments at the end of every 6 months. The nominal rate of interest is 8%, convertible half yearly. Find the total amount of interest payment made over the 10-year period.
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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1) A loan of $10,000 is repaid by 20 level installments at the end of every 6
months. The nominal rate of interest is 8%, convertible half yearly. Find the
total amount of interest payment made over the 10-year period.
Expert Solution
Step 1
Loan refers to the amount borrowed which creates liability for fund receiver and level installments is the equal amount of annuity payments. The interest payment serves as the cost for loan which will be ascertained by first computing total payment made with annuity then deducting $10,000 from same.
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