Problem 4.10 A loan of $1,000 is repaid by equal annual amounts of principal for 10 years and annual interest of 7% on the outstanding balance. (a) Draw the amortization schedule of loan payments. (b) What is the present value of the payments in (a) at 7% effective? (c) What is the purchase price of this loan to yield 5% effective? (hint: find the PV of payments using i=5%)
Problem 4.10 A loan of $1,000 is repaid by equal annual amounts of principal for 10 years and annual interest of 7% on the outstanding balance. (a) Draw the amortization schedule of loan payments. (b) What is the present value of the payments in (a) at 7% effective? (c) What is the purchase price of this loan to yield 5% effective? (hint: find the PV of payments using i=5%)
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 12P
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Transcribed Image Text:Problem 4.10 A loan of $1,000 is repaid by equal annual amounts of principal for 10 years and
annual interest of 7% on the outstanding balance.
(a) Draw the amortization schedule of loan payments.
(b) What is the present value of the payments in (a) at 7% effective?
(c) What is the purchase price of this loan to yield 5% effective? (hint: find the PV of payments
using i=5%)
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