After doing a complex amortization calculation to find the payment, we often will calculate how much interest a borrower pays over the life of the loan. One thing we need to find first is how much the borrower pays back in total (then we can subtract the principal). This calculation is very simple compared with the amortization formula! We just multiply the payment by the number of payments made. For example, if the monthly payments are $300, and the loan is 18 years, then the total amount the borrower pays back, which includes principal and interest, is just: $300 month 12 months year his) (18 18 years 1 $64800. Find the total amount the borrower pays (principal and interest) in each case below: The payments are $312 per month for 60 months (a 5 year loan): $ The payments are $837 per month for 30 years: $

After doing a complex amortization calculation to find the payment, we often will calculate how much interest a borrower pays over the life of the loan. One thing we need to find first is how much the borrower pays back in total (then we can subtract the principal). This calculation is very simple compared with the amortization formula! We just multiply the payment by the number of payments made. For example, if the monthly payments are $300, and the loan is 18 years, then the total amount the borrower pays back, which includes principal and interest, is just: $300 month 12 months year his) (18 18 years 1 $64800. Find the total amount the borrower pays (principal and interest) in each case below: The payments are $312 per month for 60 months (a 5 year loan): $ The payments are $837 per month for 30 years: $

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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The time value of money is used for many important financial decisions that could affect long-term goals. The interest rate you pay on a loan can affect the amount you pay each period. An advertised monthly lending rate of 9% is about 11% per year. This difference between an advertised rate and the annualized rate is based on finer TVM details that may be overlooked by borrowers. What practical TVM application would you expect to encounter in your future? Explain.
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