John bought an expensive $2,740 stereo. He took out an amortized loan for the full amount at 3.12% annual interest compounded monthly and repaid the loan in 4 substantially equal monthly payments. (a) What was the monthly interest rate? % (b) What initial monthly payment was John required to make? $ (c) Fill-in the cells of the amortization schedule for this loan: Amortization Schedule for John's Loan Period Current Balance at start of period Payment Amount Amount Interest Paid Principal Repaid Current Balance after payment 1 $2,740 2 3 4
John bought an expensive $2,740 stereo. He took out an amortized loan for the full amount at 3.12% annual interest compounded monthly and repaid the loan in 4 substantially equal monthly payments. (a) What was the monthly interest rate? % (b) What initial monthly payment was John required to make? $ (c) Fill-in the cells of the amortization schedule for this loan: Amortization Schedule for John's Loan Period Current Balance at start of period Payment Amount Amount Interest Paid Principal Repaid Current Balance after payment 1 $2,740 2 3 4
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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Question
John bought an expensive $2,740 stereo. He took out an amortized loan for the full amount at 3.12% annual interest compounded monthly and repaid the loan in 4 substantially equal monthly payments.
(a) What was the monthly interest rate?
%
(b) What initial monthly payment was John required to make?
$
(c) Fill-in the cells of the amortization schedule for this loan:
Amortization Schedule for John's Loan
| Period |
Current Balance at start of period |
Payment Amount |
Amount Interest Paid |
Principal Repaid |
Current Balance after payment |
|---|---|---|---|---|---|
| 1 | $2,740 | ||||
| 2 | |||||
| 3 | |||||
| 4 |
Expert Solution
Step 1
A type of loan in which the borrower has to make a schedule for the periodic payment regarding both principal and interest amount is term as the amortized loan.
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