Create the following payments for a loan of 240,000 that must be repaid in three years at a 12% annual interest rate: Plan 1: Pay principal and interest in one payment at the end of three years Plan 2: Pay interest at end of each year and principal at the end of three years Plan 3: At the end of each year, pay 80,000 principal plus interest due Plan 4: Pay in three equal end-of-year payments Show the payment plans by supplying the values in the table below. Solution: Year Amount owed at beginning of year Interest accrued for Total money owed at end of year Amount of principal paid Total end-of- year payment year Plan 1: Pay principal and interest in one payment at the end of three years 1 2 3 Plan 2: Pay interest at end of each year and principal at the end of three years 1 2 3 Plan 3: At the end of each year, pay P 80,000 principal plus interest due 1 2 3 Plan 4: Pay in three equal end-of-year payments 1 2 3
Create the following payments for a loan of 240,000 that must be repaid in three years at a 12% annual interest rate: Plan 1: Pay principal and interest in one payment at the end of three years Plan 2: Pay interest at end of each year and principal at the end of three years Plan 3: At the end of each year, pay 80,000 principal plus interest due Plan 4: Pay in three equal end-of-year payments Show the payment plans by supplying the values in the table below. Solution: Year Amount owed at beginning of year Interest accrued for Total money owed at end of year Amount of principal paid Total end-of- year payment year Plan 1: Pay principal and interest in one payment at the end of three years 1 2 3 Plan 2: Pay interest at end of each year and principal at the end of three years 1 2 3 Plan 3: At the end of each year, pay P 80,000 principal plus interest due 1 2 3 Plan 4: Pay in three equal end-of-year payments 1 2 3
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Create the following payments for a loan of 240,000 that must be repaid in three years at a 12%
annual interest rate:
Plan 1: Pay principal and interest in one payment at the end of three years
Plan 2: Pay interest at end of each year and principal at the end of three years
Plan 3: At the end of each year, pay 80,000 principal plus interest due
Plan 4: Pay in three equal end-of-year payments
Show the payment plans by supplying the values in the table below.
Solution:
Year Amount owed
at beginning
of year
Interest
accrued for
Total money
owed at end
of year
Amount of
principal paid
Total end-of-
year payment
year
Plan 1: Pay principal and interest in one payment at the end of three years
1
2
3
Plan 2: Pay interest at end of each year and principal at the end of three years
1
2
3
Plan 3: At the end of each year, pay P 80,000 principal plus interest due
1
2
3
Plan 4: Pay in three equal end-of-year payments
1
2
3
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