Mr. Arthur borrowed GH¢200,000 from his bankers to buy his dream house. Repayment is over 4 years and first payment is due one year from hence. He will make equal payments to amortize both the principal and interest, which is calculated on a reducing balance basis. The bank will charge 5% above its current base rate of 20% per annum. Required: i. Calculate Mr Arthur’s annual payments ii. Show a table on how the annual payment will liquidate the loan and interest.
Mr. Arthur borrowed GH¢200,000 from his bankers to buy his dream house. Repayment is over 4 years and first payment is due one year from hence. He will make equal payments to amortize both the principal and interest, which is calculated on a reducing balance basis. The bank will charge 5% above its current base rate of 20% per annum. Required: i. Calculate Mr Arthur’s annual payments ii. Show a table on how the annual payment will liquidate the loan and interest.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Mr. Arthur borrowed GH¢200,000 from his bankers to buy his dream house. Repayment is over 4 years and first payment is due one year from hence. He will make equal payments to amortize both the principal and interest, which is calculated on a reducing balance basis. The bank will charge 5% above its current base rate of 20% per annum.
Required:
i. Calculate Mr Arthur’s annual payments
ii. Show a table on how the annual payment will liquidate the loan and interest.
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