Interest-only loan (regular interest payments each year and principal at maturity). Chuck Ponzi has talked an elderly woman into loaning him $50,000 for a new business venture. She has, however, successfully passed a finance class and requires Chuck to sign a binding contract on repayment of the $50,000 with an annual interest rate of 8% over the next 15 years. Determine the cash flow to the woman under an interest-only loan, in which Ponzi will pay the annual interest expense each year and pay the principal back at the end of the contract. What is the amount of payment that the woman will receive at the end of years 1 through 14?
Interest-only loan (regular interest payments each year and principal at maturity). Chuck Ponzi has talked an elderly woman into loaning him $50,000 for a new business venture. She has, however, successfully passed a finance class and requires Chuck to sign a binding contract on repayment of the $50,000 with an annual interest rate of 8% over the next 15 years. Determine the cash flow to the woman under an interest-only loan, in which Ponzi will pay the annual interest expense each year and pay the principal back at the end of the contract. What is the amount of payment that the woman will receive at the end of years 1 through 14?
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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Chapter 4. Question 10. Two Questions. Attached is a similar question with answers. This question will have a follow up question like the answered example
Transcribed Image Text:Interest-only loan (regular interest payments each year and principal at maturity). Chuck Ponzi has talked an elderly woman into loaning him $50,000 for a new
business venture. She has, however, successfully passed a finance class and requires Chuck to sign a binding contract on repayment of the $50,000 with an annual
interest rate of 8% over the next 15 years. Determine the cash flow to the woman under an interest-only loan, in which Ponzi will pay the annual interest expense each
year and pay the principal back at the end of the contract.
What is the amount of payment that the woman will receive at the end of years 1 through 14?
$ (Round to the nearest dollar.)
Transcribed Image Text:Interest-only loan (regular interest payments each year and principal at maturity). Chuck Ponzi has talked an elderly woman into loaning him $10,000 for a new
business venture. She has, however, successfully passed a finance class and requires Chuck to sign a binding contract on repayment of the $10,000 with an annual
interest rate of 12% over the next 20 years. Determine the cash flow to the woman under an interest-only loan, in which Ponzi will pay the annual interest expense
each year and pay the principal back at the end of the contract.
What is the amount of payment that the woman will receive at the end of years 1 through 19?
$ 1200 (Round to the nearest dollar.)
What is the amount of payment that the woman will receive at the end of the loan in year 20?
$ 11,200 (Round to the nearest dollar.)
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