Ruth availed of a cash loan that gave her an option to pay P5,000 monthly for 1 year. The first payment due after 6 months. How much is the present value of the loan if the interest rate is 5% converted monthly? In the given problem, what is 5%?

Ruth availed of a cash loan that gave her an option to pay P5,000 monthly for 1 year. The first payment due after 6 months. How much is the present value of the loan if the interest rate is 5% converted monthly? In the given problem, what is 5%?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.17: Amortized Loans

Problem 1ST

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

Ruth availed of a cash loan that
gave her an option to pay P5,000
monthly for l year. The first
payment due after 6 months. How
much is the present value of the
loan if the interest rate is 5%
converted monthly?
In the given problem, what is 5%?
Annual Rate
O Nominal Rate
Interest rate per conversion period
Rate
SLIDESMANIA COM

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