CFIN
CFIN
5th Edition
ISBN: 9781305661639
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 4, Problem 25PROB
Summary Introduction

N has taken 5-year loan of $32,000 at 3% interest compounded monthly.

Present value of an annuity is the current value of future payment or the present value of a series of future periodic payments made at the end of each payment period.

PV=PMT[11(1+r)nr]

Here,

The present value is “PV”.

The periodic payments are “PMT”.

The interest rate is “r”.

The maturity period of number of years is “n”.

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Nona purchased a new car earlier today for $32,000. She financed the entire amount using a five-year loan with a 3% interest rate (compounded monthly). (a) Compute the monthly payments for the loan. (b) How much will Nona owe on the loan after she makes payments for two years (i.e., after 24 payments)?
Abigail received a 15 year loan of $280,000 to purchase a house. The interest rate on the loan was 5.80% compounded semi-annually. a. What is the size of the monthly loan payment? b. What is the balance of the loan at the end of year 2? c. By how much will the amortization period shorten if Abigail makes an extra payment of $30,000 at the end of year 2?
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