You are offered an add-on loan for $4,500 at 18% for 5 years.What is the monthly payment?What is the amount of interest?What is the true interest rate cost of this loan? If you could pay the same loan above at a compound rate:What would the monthly payment be?What would the amount of interest be? Prepare a monthly payment schedule for each loan above using Excel, and submit it.Suppose that you are only allowed to make a balloon payment to the principal of the compound interest loan. You have $1,000 to put down at the beginning of year three. How many payments will you save?

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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You are offered an add-on loan for $4,500 at 18% for 5 years.
1. What is the monthly payment?
2. What is the amount of interest?
3. What is the true interest rate cost of this loan?
If you could pay the same loan above at a compound rate:
1. What would the monthly payment be?
2. What would the amount of interest be?
Prepare a monthly payment schedule for each loan above using Excel, and submit it.
Suppose that you are only allowed to make a balloon payment to the principal of the compound interest loan. You have $1,000 to put down at the beginning of year three. How many payments will you save?

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