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
Related questions
Question
(engineering economic )
An investor gets a loan from a bank of Rp. 500 million to fund new ventures to be run. The loan bears 10% compound interest annually with a five-year repayment period. The interest on the loan along with the principal loan is paid at the same time at the end of the loan period. After 3 years, the bank provides an additional loan of Rp. 300 million but increased the interest to 12% annually and changed the interest calculation based on a single interest calculation. Calculate the repayment of this loan at the end of the loan period and describe the cash flow.
Expert Solution
Step 1: Summary of Questions
Loan 1 :
Principal Amount ( P1)= Rp. 500 million
Compound Interest on P1 (r1)= 10 %p.a.
Time period (t1) = 5 years
Number of times compounded in one 't1'(n1)= 1
Additional Loan :
Principal Amount ( P2) = Rp.300 million
Compound Interest on P2 (r2)= 12%
Time Period (t2) = 2 years
Number of times compounded in one 't2'(n2)= 1
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