You borrow $720,000 at 4.00% per year compounded monthly and you plan to pay off this loan in equal annual payments starting one year after the loan is made over a period of fifteen (15) years. a. What are the annual end-of-year payments? Determine the amount of interest and principal that are paid each year. What is the total interest paid for the loan? b. Restructure the loan in the previous question to make payments monthly. Determine the savings in interest overall. c. Restructure your payment schedule once more to make payment every two weeks. Determine the savings in interest (if any) in this case (compare to both previous repayment options).
You borrow $720,000 at 4.00% per year compounded monthly and you plan to pay off this loan in equal annual payments starting one year after the loan is made over a period of fifteen (15) years. a. What are the annual end-of-year payments? Determine the amount of interest and principal that are paid each year. What is the total interest paid for the loan? b. Restructure the loan in the previous question to make payments monthly. Determine the savings in interest overall. c. Restructure your payment schedule once more to make payment every two weeks. Determine the savings in interest (if any) in this case (compare to both previous repayment options).
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:4.
You borrow $720,000 at 4.00% per year compounded monthly and you plan to pay off this loan in
equal annual payments starting one year after the loan is made over a period of fifteen (15) years.
What are the annual end-of-year payments? Determine the amount of interest and principal
that are paid each year. What is the total interest paid for the loan?
a.
b. Restructure the loan in the previous question to make payments monthly. Determine the
savings in interest overall.
C.
Restructure your payment schedule once more to make payment every two weeks. Determine
the savings in interest (if any) in this case (compare to both previous repayment options).
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