You need $20,000 to purchase a used car. Your wealthy uncle is willing to lend you the money as an amortized loan. He would like you to make annual payments for 6 years, with the first payment to be made one year from today. He requires a 7% annual return. What will be your annual loan payments? Do not round intermediate calculations. How much of your first payment will be applied to interest and to principal repayment? Do not round intermediate calculations. Round your answers to the nearest cent.
You need $20,000 to purchase a used car. Your wealthy uncle is willing to lend you the money as an amortized loan. He would like you to make annual payments for 6 years, with the first payment to be made one year from today. He requires a 7% annual return. What will be your annual loan payments? Do not round intermediate calculations. How much of your first payment will be applied to interest and to principal repayment? Do not round intermediate calculations. Round your answers to the nearest cent.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
You need $20,000 to purchase a used car. Your wealthy uncle is willing to lend you the money as an amortized loan. He would like you to make annual payments for 6 years, with the first payment to be made one year from today. He requires a 7% annual return.
- What will be your annual loan payments? Do not round intermediate calculations.
- How much of your first payment will be applied to interest and to principal repayment? Do not round intermediate calculations. Round your answers to the nearest cent.
Expert Solution
Step 1
Loan :— Loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations etc.
Loan Include Rate of Interest which is Payable by the Borrower on Time.
Interest on Loan = Loan Amount * Rate of Interest
Annual Loan Payment Be Calculated by Dividing loan Amount to Present Value Annuity Factor
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