Consider a loan of $98,000 at 7% compounded annually, with 12 annual payments. Find the following. (a) the payment necessary to amortize the loan (b) the total payments and the total amount of interest paid based on the calculated annual payments (c) the total payments and total amount of interest paid based upon an amortization table.
Consider a loan of $98,000 at 7% compounded annually, with 12 annual payments. Find the following. (a) the payment necessary to amortize the loan (b) the total payments and the total amount of interest paid based on the calculated annual payments (c) the total payments and total amount of interest paid based upon an amortization table.
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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Transcribed Image Text:Consider a loan of $98,000 at 7% compounded annually, with 12 annual payments. Find the following.
(a) the payment necessary to amortize the loan
(b) the total payments and the total amount of interest paid based on the calculated annual payments
(c) the total payments and total amount of interest paid based upon an amortization table.
...
(a) The annual payment needed to amortize this loan is $
(Round to the nearest cent as needed.)
(b) The total amount of the payments is $
(Round to the nearest cent as needed.)
The total amount of interest paid is $
(Round to the nearest cent as needed.)
(c) The total payment for this loan from the amortization table is $
(Round to the nearest cent as needed.)
The total interest from the amortization table is $
(Round to the nearest cent as needed.)
Expert Solution
Introduction
Loan amortization can be defined as the procedure of amortizing the loan in such a way that the loan is written off or paid off slowly and gradually over a period of time at a regular payment interval at the prescribed rate of interest and the prescribed time period.
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