You are considering purchasing a lot adjacentto your laundry business to provide adequate parking space for your customers. You need to borrow$75,000 to secure the lot. You have made a deal with alocal bank to pay the loan back over a five-year periodwith the following payment terms: 14%, 20%, 26%,32%, and 38% of the initial loan at the end of first,second, third, fourth, and fifth years, respectively.(a) What rate of interest is the bank earning fromthis loan?(b) What would be the total interest paid over thefive-year period?
Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
You are considering purchasing a lot adjacent
to your laundry business to provide adequate parking space for your customers. You need to borrow
$75,000 to secure the lot. You have made a deal with a
local bank to pay the loan back over a five-year period
with the following payment terms: 14%, 20%, 26%,
32%, and 38% of the initial loan at the end of first,
second, third, fourth, and fifth years, respectively.
(a) What rate of interest is the bank earning from
this loan?
(b) What would be the total interest paid over the
five-year period?
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