Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
14th Edition
ISBN: 9780133507690
Author: Lawrence J. Gitman, Chad J. Zutter
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 5, Problem 5.61P
Time to repay Installment loan Mia Saito wishes to determine how long it will take to repay a $14,000 loan given that the lender requires her to make annual end-of-year installment payments of $2,450.
- a. If the interest rate on the loan is 12%, how long will it take her to repay the loan fully?
- b. How long will it take if the interest rate is 9%?
- c. How long will it take if she has to pay 15% annual interest?
- d. Reviewing your answers in parts a, b, and c, describe the general relationship between the interest rate and the amount of time it will take Mia to repay the loan fully.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Time to repay installment loan Personal Finance Problem
Mia Salto wishes to determine how long it will take to repay a $18000 loan given that the lender requires her to make annual end-of-year installment payments of $3906.
a. If the interest rate on the loan is 11%, how long will it take for her to repay the loan fully?
b. How long will it take if the interest rate is 8%?
c. How long will it take if she has to pay 14% annual interest?
d. Reviewing your answers in parts a, b, and c, describe the general relationship between the interest rate and the amount of time it will take Mia to repay the loan fully.
Time to repay installment loan Personal Finance Problem Mia Salto wishes to determine how long it will take to repay a $18,000 loan given that the lender requires her to make annual end-of-year installment payments of $3,379.
a. If the interest rate on the loan is 14%, how long will it take for her to repay the loan fully?
b. How long will it take if the interest rate is 11%?
c. How long will it take if she has to pay 18% annual interest?
d. Reviewing your answers in parts a, b, and c, describe the general relationship between the interest rate and the amount of time it will take Mia to repay the loan fully.
a. If Mia can borrow at an annual interest rate of 14%, the amount of time it will take for her to repay the loan fully is years. (Round to two decimal places.)
C
Time to repay installment loan Personal Finance Problem
Mia Salto wishes to determine how long it will take to repay a $17,000 loan given that the lender requires her to make annual end-of-year installment payments of $2,745.
a. If the interest rate on the loan is 12%, how long will it take for her to repay the loan fully?
b. How long will it take if the interest rate is 9%?
c. How long will it take if she has to pay 15% annual interest?
d. Reviewing your answers in parts a, b, and c, describe the general relationship between the interest rate and the amount of time it will take Mia to repay the loan fully.
Chapter 5 Solutions
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
Ch. 5.1 - What is the difference between future value and...Ch. 5.1 - Define and differentiate among the three basic...Ch. 5.2 - Prob. 5.3RQCh. 5.2 - Prob. 5.4RQCh. 5.2 - Prob. 5.5RQCh. 5.2 - Prob. 5.6RQCh. 5.2 - Prob. 5.7RQCh. 5.3 - What is the difference between an ordinary annuity...Ch. 5.3 - What are the most efficient ways to calculate the...Ch. 5.3 - How can the formula for the future value of an...
Ch. 5.3 - Prob. 5.13RQCh. 5.3 - Prob. 5.14RQCh. 5.4 - How do you calculate the future value of a mixed...Ch. 5.5 - What effect does compounding interest more...Ch. 5.5 - Prob. 5.21RQCh. 5.5 - Differentiate between a nominal annual rate and an...Ch. 5.5 - Prob. 1FOECh. 5.6 - Prob. 1FOPCh. 5.6 - How can you determine the size of the equal,...Ch. 5.6 - Prob. 5.27RQCh. 5.6 - How can you determine the unknown number of...Ch. 5 - Learning Goals 2, 5 ST5-1 Future values for...Ch. 5 - Prob. 5.3STPCh. 5 - Learning Goal 6 ST5-4 Deposits needed to...Ch. 5 - Assume that a firm makes a 2,500 deposit into a...Ch. 5 - Prob. 5.2WUECh. 5 - Prob. 5.3WUECh. 5 - Your firm has the option of making an investment...Ch. 5 - Joseph is a friend of yours. He has plenty of...Ch. 5 - Jack and Jill have just had their first child. If...Ch. 5 - Prob. 5.1PCh. 5 - Learning Goal 2 P5-2 Future value calculation...Ch. 5 - Prob. 5.3PCh. 5 - Prob. 5.4PCh. 5 - Prob. 5.5PCh. 5 - Learning Goal 2 P5- 6 Time value As part of your...Ch. 5 - Learning Goal 2 P5-7 Time value you can deposit...Ch. 5 - Learning Goal 2 P5-8 Time value Misty needs to...Ch. 5 - Prob. 5.9PCh. 5 - Prob. 5.10PCh. 5 - Prob. 5.11PCh. 5 - Prob. 5.12PCh. 5 - Prob. 5.13PCh. 5 - Prob. 5.14PCh. 5 - Prob. 5.15PCh. 5 - Prob. 5.16PCh. 5 - Cash flow investment decision Tom Alexander has an...Ch. 5 - Learning Goal 2 P5-18 Calculating deposit needed...Ch. 5 - Future value of an annuity for each case in the...Ch. 5 - Present value of an annuity Consider the following...Ch. 5 - Prob. 5.21PCh. 5 - Learning Goal 3 P5-22 Retirement planning Hal...Ch. 5 - Learning Goal 3 P5-23 Value of a retirement...Ch. 5 - Prob. 5.24PCh. 5 - Learning Goal 2, 3 P5-25 Value of an annuity...Ch. 5 - Prob. 5.26PCh. 5 - Prob. 5.27PCh. 5 - Prob. 5.28PCh. 5 - Prob. 5.29PCh. 5 - Prob. 5.30PCh. 5 - Prob. 5.31PCh. 5 - Prob. 5.32PCh. 5 - Prob. 5.33PCh. 5 - Prob. 5.34PCh. 5 - Prob. 5.35PCh. 5 - Prob. 5.36PCh. 5 - Prob. 5.37PCh. 5 - Prob. 5.38PCh. 5 - Prob. 5.39PCh. 5 - Prob. 5.40PCh. 5 - Learning Goals 3, 5 P5-42 Annuities and...Ch. 5 - Prob. 5.42PCh. 5 - Prob. 5.43PCh. 5 - Prob. 5.44PCh. 5 - Prob. 5.45PCh. 5 - Prob. 5.46PCh. 5 - Prob. 5.47PCh. 5 - Loan amortization schedule Joan Messineo borrowed...Ch. 5 - Prob. 5.49PCh. 5 - Prob. 5.50PCh. 5 - Prob. 5.51PCh. 5 - Prob. 5.52PCh. 5 - Prob. 5.53PCh. 5 - Prob. 5.54PCh. 5 - Prob. 5.55PCh. 5 - Prob. 5.56PCh. 5 - Prob. 5.57PCh. 5 - Number of years needed to acccumulate a future...Ch. 5 - Prob. 5.59PCh. 5 - Prob. 5.60PCh. 5 - Time to repay Installment loan Mia Saito wishes to...Ch. 5 - Prob. 5.62P
Additional Business Textbook Solutions
Find more solutions based on key concepts
Explain what is meant by the statement “The use of current liabilities as opposed to long-term debt subjects th...
Foundations of Finance (9th Edition) (Pearson Series in Finance)
Incremental IRR and its shortcomings. Introduction: IRR helps to make capital budget decisions. IRR relies on t...
Corporate Finance
The option contract that have the most trades at present.
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Assume that the bonds are selling for the following amounts:
Microsoft $1,100
GE Capital $1,030
Morgan Stanley ...
Foundations Of Finance
An annuity provides for 10 consecutive end-of-year payments of 72,000. The average general inflation rate is es...
Contemporary Engineering Economics (6th Edition)
How does the planning of fixed overhead costs differ from the planning of variable overhead costs?
Cost Accounting (15th Edition)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Cost of Bank Loan Mary Jones recently obtained an equipment loan from a local bank. The loan is for 15,000 with a nominal interest rate of 11%. However, this is an installment loan, so the bank also charges add-on interest. Mary must make monthly payments on the loan, and the loan is to be repaid in 1 year. What is the effective annual rate on the loan (assuming a 365-day year)?arrow_forwardCalculating single-payment loan amount due at maturity. Stanley Price plans to borrow 8,000 for five years. The loan will be repaid with a single payment after five years, and the interest on the loan will be computed using the simple interest method at an annual rate of 6 percent. How much will Stanley have to pay in five years? How much will he have to pay at maturity if hes required to make annual interest payments at the end of each year?arrow_forwardCalculating and comparing add-on and simple interest loans. Eli Nelson is borrowing 10,000 for five years at 7 percent. Payments, which are made on a monthly basis, are determined using the add-on method. a. How much total interest will Eli pay on the loan if it is held for the full five-year term? b. What are Elis monthly payments? c. How much higher are the monthly payments under the add-on method than under the simple interest method?arrow_forward
- Help me sir please in text not handwrittenarrow_forwardMary Ott is going to borrow $5,800 for 60 days and pay $159 interest. What is the effective rate of interest if the loan is discounted? Note: Use a 360-day year. Do not round intermediate calculations. Input your answer as Effective rate on a discounted loan %arrow_forwardGive answer accounting questionarrow_forward
- Mortgage Dr. Gupta is considering a 30-year mortgage at 6% interest. She can make payments of $3500 a month. What size loan can she afford? Draw a timeline of cashflows.arrow_forwardSuppose that you decide to borrow 16000 for a new car. You can select one of the following loans each requiring regular monthly payments. Installment loan A three-year loan at 6.3% Installment loan B five -year loan at 6.4% What would be the monthly payments for each loan and total interest for them also? How much will the buyer save in interest?arrow_forwardIn a loan, the principal borrowed plus interest must be repaid. So, part of each loan payment is interest and the rest reduces the principal. For example: Payment 1: • We know that he has to pay $45.84 each month. If we just examined the first month, we know that there it is the first of 12 payments. • We know that an annuity is a series of compound interest predicaments added together, so if we are examining an individual row, we are using compound interest. • A = 45.84, i = 0.015, n 12, P = ? %3D !! 45. 84 = P(1+0.015) 2 %3D 45.84 (1+0.015)12 P = $38.34 = P %3D • We see that only $38.34 is going towards the principal, the rest, $7.50 is interest. Select one other payment on the repayment schedule, Repeat these calculations for them to show how you get the money going towards principal and to interest Analysing the repayment schedule: a. Why do you think the interest is paid before the principal is reduced? b. As the outstanding balance decreases, the interest paid decreases and the…arrow_forward
- Help with stepsarrow_forwardYou borrow $300,000 to buy a house; if the annual interest rate is 4% and the term of the loan is 20 years, what is the annual payment required to retire the mortgage loan? Complete the loan amortization schedule for the first payment: Payment Interest Portion Principal Portion Ending Balance #1arrow_forwardA man wants to borrow $1500 at 10% interest rate from October 1 through December 23. How much will he have to pay at the end of his loan term?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning
Excel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Pfin (with Mindtap, 1 Term Printed Access Card) (...
Finance
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Cengage Learning
Excel Applications for Accounting Principles
Accounting
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Cengage Learning
How To Make Money With Debt (2022); Author: Proactive Thinker;https://www.youtube.com/watch?v=pXZQBKZCWfc;License: Standard Youtube License