You have a loan outstanding. It requires making three annual payments at the end of the next three years of $1000 each. Your bank has offered to restructure the loan so that instead of making the three payments as originally agreed, you will make only one final payment at the end of the loan in three years. If the interest rate on the loan is 5%, what final payment will the bank require you to make so that it is indifferent between the two forms of payment?

Q: If your uncle borrows $70,000 from the bank at 12 percent interest over the ten-year life of the…

A: Annual payment refers to the payment that is made each year including interest and principal for…

Q: You need to borrow $12,000 to buy a car, so you visit two banks and are given two alternatives. The…

A: Loan is a contract between lender and borrower where lender provide funds to borrower which repaid…

Q: You plan to purchase a house for $166,000 using a 15-year mortgage obtained from your local bank.…

A: Discount points refer to the optional fees (extra charges) over the agreed stated interest rate on a…

Q: You have a loan outstanding. It requires making seven annual payments of $4,000 each at the end of…

A: The future value of the annuity is the sum of a series of payments received at a fixed time in the…

Q: You are borrowing $250,000 to buy a house, using a standard, 30-year mortgage. Your mortgage lender…

A: A mortgage is a covered loan taken out to purchase a property with the property itself acting as…

Q: Big Dom's Pawn Shop charges an interest rate of 20 percent per month on loans to its customers. Like…

A: When we take a loan from banks they charge us interest on that loan. Similarly when we borrow money…

Q: You borrow $ 3500 for one year from a friend at an interest rate of 1.5 % per month instead of…

A: The term loan refers to a type of credit vehicle in which a sum of money is lent to another party in…

Q: Do you want to By A home for $330,000. You plan to pay 33,000 as a down payment and take out a 15…

A: Loan amount is the amount that is borrowed from a financial institution after paying a certain…

Q: Your mortgage has 24 years​ left, and has an APR of 6.303% with monthly payments of $1,449. a. What…

A: Outstanding loan balance is calculated by present value of annuity formula. New monthly payments is…

Q: You would like to buy a house that costs $350,000. You have $50,000 in cash that you can put down on…

A: Balloon payment calculation:

Q: The final payment the bank will require you to make is $ (Round to the nearest dollar.)

A: Information Provided: Annual payments = $8000 Interest rate = 6%

Q: You need a 15-year, fixed - rate mortgage to buy a new home for $230,000. Your mortgage bank will…

A: A balloon payment is a significant, lump-sum amount due at the conclusion of a loan term, following…

Q: You are taking out a single-payment loan that uses the simple interest method to compute the finance…

A: Amount of Loan = $10,000Interest Rate (annual) = 6% = 0.06 (as a decimal)Term of Loan = 2 yearsThe…

Q: You are considering buying a house. The home is currently listed for $750,000. Terms for the loan…

A: To calculate the monthly mortgage payment, use the formula for a fixed-rate mortgage:Where:M =…

Q: You need a 25-year, fixed-rate mortgage to buy a new home for $240,000. Your mortgage bank will lend…

A: The lum sump that has to be paid at the end of the mortgage period for settling the loan at given…

Q: You would like to buy a house that costs $350,000. You have $50,000 in cash that you can put down on…

A: PV of annuity: For any given period, the present value (PV) formula would calculate the present…

Q: What is the cost of two points on the mortgage?

A: Information Provided: Selling Price = $125,000 Downpayment = 20% or $25,000 Loan amount = $100,000…

Q: You have a choice between a 30-year fixed rate loan at 6.5% and an adjustable rate mortgage (ARM)…

A: EMI or monthly or annual mortgage payments are the fixed amount paid by the borrower to the lender…

Q: The final payment the bank will require you to make is ​$

A: This is the case of Future Value of annuity Future Value of annuity = PMT * [ {(1+ r)n -1}/r]where…

Q: Suppose you take out a 30-year mortgage for a house that costs 5490, 236. Assume the following: The…

A: Here, Cost of House $         5,490,236.00Minimum Down Payment18%Annual Interest Rate3.60%Annual…

Q: You have credit card debt of $30,000 that has an APR (monthly compounding) of 18%. Each month you…

A: Monthly Interest rate of old card=18%/12=1.5%Interest payment of old card per month=$30000*1.5%=…

Q: You are considering refinancing your home’s 30 year mortgage at a lower interest rate.  Your…

A: When the interest rate on loan drops, borrowers tend to refinance their loan becuase in such cases,…

Q: You are considering buying a house.  The home is currentlylisted for $750,000.  Terms for the loan…

A: The following is the excel formula used for the calculation:

Q: you want to withdraw $100 from an account in year one. Also, you want to withdraw $200, $250 and $70…

A: Present value is the equivalent value today of the future money based on time value of money and…

Q: You want to borrow $77,000 from your local bank to buy a new sailboat. You can afford to make…

A: Compound = Monthly = 12Present Value = pv = $77,000Monthly Payment = p = $1300Time = t = 78

Q: You need a 30-year, fixed-rate mortgage to buy a new home for $290,000. YOL mortgage bank will lend…

A: Balloon payment is the single large payment that is made at the end of loan period to pay all…

Q: You have credit card debt of $30,000 that has an APR (monthly compounding) of 15%. Each month you…

A: In the realm of personal finance, credit cards play a significant role in managing expenditures and…

Q: You have a loan outstanding. It requires making five annual payments of $2,000 each at the end of…

A: Annual payments for a loan carry the payment for interest and payment for the loan also but these…

Q: Suppose that you owe $2500 on a credit card   that charges 18% APR and you pay either the…

A: The number of months it will take to pay off the loan can be seen from the amortization table.

Q: You obtain a 30-year home mortgage and your monthly payment is $3000.00. Instead of paying monthly…

A: Time period for mortgage is 30 years Case -1:Monthly payment of $3000 Case -2: Yearly  payment of…

Q: Your credit card has a balance of $4100 and an annual interest rate of 15%. You decide to pay off…

A: Balance amount=$4100 Interest rate=15% Time period=3 years 3 years monthly payment=$142.13 3 years…

Q: norigage has 21 years left, and has an APR of 8.707% Withn montniy payments of $1,449. at is the…

A: The mortgage loans are to be paid by the monthly payments and these monthly payments carry the…

Q: Suppose you are buying your first condo for $190,000, and you will make a $10,000 down payment. You…

A: Monthly payments refer to the amount that is being in every month including the principal and…

Loans

A loan is a term that we are all familiar with. The processing of loans is one of the most important functions of a bank. It keeps our economy stable and facilitates the implementation of monetary policies. Let's take a look at the different forms of loans and get some answers to some common questions.