(4) FIN302_Excel with answers_Loans and amortization table_Feb5 (3)

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Feb 20, 2024

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Interest rate 5% Options Loan 1. No leverage $0.00 2. Small leverage $60.00 (buy a car; use your money $40 + $60 loan) 3. Large leverage $900.00 (buy 10 cars; use your money $100+ $900 loan) 1) No leverage Time Action Cash Flow Cash Flow Today (t=0) Taking out a loan $0 $0 =$B$3 Purchase a car -$100 -$100 =-$G$1 Net cash flow today -$100 -$100 =C9+C10 Repay the loan with interests $0 $0 =-C9*(1+$B$1) Sell the car 110 90 =G2 Net cash flow in one year $110 $90 =C12+C13 Profit as % of initial investment 10.0% -10.0% =(C14+C11)/-C11 2) Small leverage ($60 loan) Time Action Cash Flow Cash Flow Today (t=0) Taking out a loan $60 $60 =$B$4 Purchase a car -$100 -$100 =-$G$1 Net cash flow today -$40 -$40 =C19+C20 Repay the loan with interests -$63 -$63 =-C19*(1+$B$1) Sell the car 110 90 =G2 Net cash flow in one year $47 $27 =C23+C22 Profit as % of initial investment 17.5% -32.5% =(C24+C21)/-C21 3) Large leverage ($900) Time Action Cash Flow Cash Flow Today (t=0) Taking out a loan $900 $900 =$B$5 Purchase a car -$1,000 -$1,000 =-10*$G$1 Net cash flow today -$100 -$100 =C29+C30 Repay the loan with interests -$945 -$945 =-C29*(1+$B$1) Sell the car 1,100 900 =G2*10 Net cash flow in one year $155 -$45 =C32+C33 Profit as % of initial investment 55.0% -145.0% =(C34+C31)/-C31 One year from now (t=1) One year from now (t=1) One year from now (t=1)
Price (t=0) $100 Price (t=1) $110 $90 =$B$3 =-$G$1 =D9+D10 =-D9*(1+$B$1) =H2 =D12+D13 =(D14+D11)/-D11 =$B$4 =-$G$1 =D19+D20 =-D19*(1+$B$1) =H2 =D23+D22 =(D24+D21)/-D21 =$B$5 =-10*$G$1 =D29+D30 =-D29*(1+$B$1) =H2*10 =D32+D33 =(D34+D31)/-D31 -200.0% -150.0% -100.0% -50.0% 0.0% 50.0% 100.0% Impact of Leverage Price in year 1=$110 Price in year 1=$
$90
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AMORTIZATION TABLE: MORTGAGE (EQUAL PAYMENTS) Loan amount $ 100,000 Interest rate (APR) 8% Term (in years) 10 Annual payment $14,902.95 =PMT(B3,B4,-B2,,0) Year 1 100,000.00 14,902.95 8,000.00 6,902.95 93,097.05 2 93,097.05 14,902.95 7,447.76 7,455.18 85,641.87 3 85,641.87 14,902.95 6,851.35 8,051.60 77,590.27 4 77,590.27 14,902.95 6,207.22 8,695.73 68,894.54 5 68,894.54 14,902.95 5,511.56 9,391.39 59,503.15 6 59,503.15 14,902.95 4,760.25 10,142.70 49,360.46 7 49,360.46 14,902.95 3,948.84 10,954.11 38,406.34 8 38,406.34 14,902.95 3,072.51 11,830.44 26,575.90 9 26,575.90 14,902.95 2,126.07 12,776.88 13,799.03 10 13,799.03 14,902.95 1,103.92 13,799.03 0.00 $77,590.27 =F10 $77,590.27 =PV(B3,10-3,-B5 $77,590.27 =NPV(B3,C11:C1 A. Loan balance at beginning of year B. Total payment C. Interest payment D. Principal repayment E. Loan principal balance at end of year ending balance at year 3=> A B C D E F 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
formulatext =B2 =$B$5 =B8*$B$3 =C8-D8 =B8-E8 =F8 =$B$5 =B9*$B$3 =C9-D9 =B9-E9 =F9 =$B$5 =B10*$B$3 =C10-D10 =B10-E10 =F10 =$B$5 =B11*$B$3 =C11-D11 =B11-E11 =F11 =$B$5 =B12*$B$3 =C12-D12 =B12-E12 =F12 =$B$5 =B13*$B$3 =C13-D13 =B13-E13 =F13 =$B$5 =B14*$B$3 =C14-D14 =B14-E14 =F14 =$B$5 =B15*$B$3 =C15-D15 =B15-E15 =F15 =$B$5 =B16*$B$3 =C16-D16 =B16-E16 =F16 =$B$5 =B17*$B$3 =C17-D17 =B17-E17 5,,0) 17) A. Loan balance at beginning of year B. Total payment C. Interest payment D. Principal repayment E. Loan principal balance at end of year 1 2 3 4 5 6 7 8 9 10 0.00 10,000.00 20,000.00 30,000.00 40,000.00 50,000.00 60,000.00 70,000.00 80,000.00 90,000.00 100,000.00 $100,000 10 year equal payment loan at 8% E. Loan principal balance at end of year B. Total payment C. Interest payment D. Principal repayment G H I J K L M N 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
Loan amount $ 100,000 8% 10 Year 1 $ 100,000.00 $8,000.00 $6,902.95 $14,902.95 $93,097.05 =B2 2 $93,097.05 $7,447.76 $7,455.18 $14,902.95 $85,641.87 =F7 3 $85,641.87 $6,851.35 $8,051.60 $14,902.95 $77,590.27 =F8 4 $77,590.27 $6,207.22 $8,695.73 $14,902.95 $68,894.54 =F9 5 $68,894.54 $5,511.56 $9,391.39 $14,902.95 $59,503.15 =F10 6 $59,503.15 $4,760.25 $10,142.70 $14,902.95 $49,360.46 =F11 7 $49,360.46 $3,948.84 $10,954.11 $14,902.95 $38,406.34 =F12 8 $38,406.34 $3,072.51 $11,830.44 $14,902.95 $26,575.90 =F13 9 $26,575.90 $2,126.07 $12,776.88 $14,902.95 $13,799.03 =F14 10 $13,799.03 $1,103.92 $13,799.03 $14,902.95 $ 0.00 =F15 MORTIZATION TABLE: MORTGAGE USING IPMT AND PPM Interest rate (APR) Loan period in years Loan balance at beginning of year Interest payment Principal repayment Total payments Loan principal balance at end of year Loan balance at beginning of year A B C D E F G 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
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formulatext Interest payment =C7+D7 =B7-D7 =C8+D8 =B8-D8 =C9+D9 =B9-D9 =C10+D10=B10-D10 =C11+D11=B11-D11 =C12+D12=B12-D12 =C13+D13=B13-D13 =C14+D14=B14-D14 =C15+D15=B15-D15 =C16+D16=B16-D16 Principal repayment Total payments Loan principal balance at end of year =IPMT($B$3,A7,$ B$4,-$B$2,,0) =PPMT($B$3,A7,$ B$4,-$B$2,,0) =IPMT($B$3,A8,$ B$4,-$B$2,,0) =PPMT($B$3,A8,$ B$4,-$B$2,,0) =IPMT($B$3,A9,$ B$4,-$B$2,,0) =PPMT($B$3,A9,$ B$4,-$B$2,,0) =IPMT($B$3,A10, $B$4,-$B$2,,0) =PPMT($B$3,A10, $B$4,-$B$2,,0) =IPMT($B$3,A11, $B$4,-$B$2,,0) =PPMT($B$3,A11, $B$4,-$B$2,,0) =IPMT($B$3,A12, $B$4,-$B$2,,0) =PPMT($B$3,A12, $B$4,-$B$2,,0) =IPMT($B$3,A13, $B$4,-$B$2,,0) =PPMT($B$3,A13, $B$4,-$B$2,,0) =IPMT($B$3,A14, $B$4,-$B$2,,0) =PPMT($B$3,A14, $B$4,-$B$2,,0) =IPMT($B$3,A15, $B$4,-$B$2,,0) =PPMT($B$3,A15, $B$4,-$B$2,,0) =IPMT($B$3,A16, $B$4,-$B$2,,0) =PPMT($B$3,A16, $B$4,-$B$2,,0) H I J K 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Loan amount $150,000 Maturity (years) 5 Annual interest rate 10% 1) Annual payment $39,569.62 =PMT(B3,B2,-B1,,0) 2) Payment 1 150,000.00 $39,569.62 15000 $24,569.62 ### 2 $125,430.38 $39,569.62 12543.03779 $27,026.58 $98,403.79 3 $98,403.79 $39,569.62 9840.379355 $29,729.24 $68,674.55 4 $68,674.55 $39,569.62 6867.455079 $32,702.17 $35,972.38 5 $35,972.38 $39,569.62 3597.238374 $35,972.38 $0.00 3) $68,674.55 =F10 $68,674.55 =PV(B3,B2-3,-B5,,0) 68,674.55 =NPV(B3,C11:C12) 4) $32,702.17 =E11 $32,702.17 =PPMT(B3,4,B2,-B1,,0) Loan beginning balance Total payment Interest payment Principal repayment Loan ending balance Outstanding balance at the end of year 3 From the amortization table we get We can also calculate directly using PV Fourth principal payment From the amortization table we get We can also calculate directly A B C D E F 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
$ Loan $150,000 Monthly payment $2,000 2) 5th payment: Term (years) 10 $748.31 1) interest rate 0.8511% =RATE(B3*12,-B2,B1,,0) Interest payment $1,251.69 => APR 10.21% =B4*12 Total payment $2,000.00 Amortization table Period Total payment 1 150,000.00 1,276.63 723.37 2,000.00 149,276.63 2 149,276.63 1,270.47 729.53 2,000.00 148,547.11 3 148,547.11 1,264.27 735.73 2,000.00 147,811.37 4 147,811.37 1,258.00 742.00 2,000.00 147,069.38 5 147,069.38 1,251.69 748.31 2,000.00 146,321.07 6 146,321.07 1,245.32 754.68 2,000.00 145,566.39 7 145,566.39 1,238.90 761.10 2,000.00 144,805.28 8 144,805.28 1,232.42 767.58 2,000.00 144,037.70 9 144,037.70 1,225.89 774.11 2,000.00 143,263.59 10 143,263.59 1,219.30 780.70 2,000.00 142,482.89 11 142,482.89 1,212.65 787.35 2,000.00 141,695.54 12 141,695.54 1,205.95 794.05 2,000.00 140,901.50 13 140,901.50 1,199.20 800.80 2,000.00 140,100.69 14 140,100.69 1,192.38 807.62 2,000.00 139,293.07 15 139,293.07 1,185.51 814.49 2,000.00 138,478.58 16 138,478.58 1,178.57 821.43 2,000.00 137,657.15 17 137,657.15 1,171.58 828.42 2,000.00 136,828.73 18 136,828.73 1,164.53 835.47 2,000.00 135,993.27 19 135,993.27 1,157.42 842.58 2,000.00 135,150.69 20 135,150.69 1,150.25 849.75 2,000.00 134,300.94 21 134,300.94 1,143.02 856.98 2,000.00 133,443.96 22 133,443.96 1,135.72 864.28 2,000.00 132,579.68 23 132,579.68 1,128.37 871.63 2,000.00 131,708.05 24 131,708.05 1,120.95 879.05 2,000.00 130,829.00 25 130,829.00 1,113.47 886.53 2,000.00 129,942.47 26 129,942.47 1,105.92 894.08 2,000.00 129,048.40 27 129,048.40 1,098.31 901.69 2,000.00 128,146.71 28 128,146.71 1,090.64 909.36 2,000.00 127,237.35 29 127,237.35 1,082.90 917.10 2,000.00 126,320.25 30 126,320.25 1,075.10 924.90 2,000.00 125,395.35 31 125,395.35 1,067.22 932.78 2,000.00 124,462.57 32 124,462.57 1,059.29 940.71 2,000.00 123,521.86 33 123,521.86 1,051.28 948.72 2,000.00 122,573.14 34 122,573.14 1,043.20 956.80 2,000.00 121,616.34 35 121,616.34 1,035.06 964.94 2,000.00 120,651.40 36 120,651.40 1,026.85 973.15 2,000.00 119,678.25 37 119,678.25 1,018.57 981.43 2,000.00 118,696.82 38 118,696.82 1,010.21 989.79 2,000.00 117,707.03 Principal payment Beginning loan balance Interest payment Principal payment Ending loan balance Microsoft Office User: Is the interest rate reasonable? No! too high!
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39 117,707.03 1,001.79 998.21 2,000.00 116,708.82 40 116,708.82 993.29 1,006.71 2,000.00 115,702.12 41 115,702.12 984.73 1,015.27 2,000.00 114,686.84 42 114,686.84 976.09 1,023.91 2,000.00 113,662.93 43 113,662.93 967.37 1,032.63 2,000.00 112,630.30 44 112,630.30 958.58 1,041.42 2,000.00 111,588.88 45 111,588.88 949.72 1,050.28 2,000.00 110,538.60 46 110,538.60 940.78 1,059.22 2,000.00 109,479.38 47 109,479.38 931.77 1,068.23 2,000.00 108,411.15 48 108,411.15 922.67 1,077.33 2,000.00 107,333.82 49 107,333.82 913.50 1,086.50 2,000.00 106,247.33 50 106,247.33 904.26 1,095.74 2,000.00 105,151.58 51 105,151.58 894.93 1,105.07 2,000.00 104,046.52 52 104,046.52 885.53 1,114.47 2,000.00 102,932.04 53 102,932.04 876.04 1,123.96 2,000.00 101,808.09 54 101,808.09 866.48 1,133.52 2,000.00 100,674.56 55 100,674.56 856.83 1,143.17 2,000.00 99,531.39 56 99,531.39 847.10 1,152.90 2,000.00 98,378.49 57 98,378.49 837.29 1,162.71 2,000.00 97,215.78 58 97,215.78 827.39 1,172.61 2,000.00 96,043.17 59 96,043.17 817.41 1,182.59 2,000.00 94,860.58 60 94,860.58 807.35 1,192.65 2,000.00 93,667.93 61 93,667.93 797.20 1,202.80 2,000.00 92,465.12 62 92,465.12 786.96 1,213.04 2,000.00 91,252.08 63 91,252.08 776.64 1,223.36 2,000.00 90,028.72 64 90,028.72 766.22 1,233.78 2,000.00 88,794.94 65 88,794.94 755.72 1,244.28 2,000.00 87,550.66 66 87,550.66 745.13 1,254.87 2,000.00 86,295.79 67 86,295.79 734.45 1,265.55 2,000.00 85,030.25 68 85,030.25 723.68 1,276.32 2,000.00 83,753.93 69 83,753.93 712.82 1,287.18 2,000.00 82,466.75 70 82,466.75 701.86 1,298.14 2,000.00 81,168.61 71 81,168.61 690.82 1,309.18 2,000.00 79,859.43 72 79,859.43 679.67 1,320.33 2,000.00 78,539.10 73 78,539.10 668.44 1,331.56 2,000.00 77,207.54 74 77,207.54 657.10 1,342.90 2,000.00 75,864.64 75 75,864.64 645.67 1,354.33 2,000.00 74,510.32 76 74,510.32 634.15 1,365.85 2,000.00 73,144.47 77 73,144.47 622.52 1,377.48 2,000.00 71,766.99 78 71,766.99 610.80 1,389.20 2,000.00 70,377.79 79 70,377.79 598.98 1,401.02 2,000.00 68,976.77 80 68,976.77 587.05 1,412.95 2,000.00 67,563.82 81 67,563.82 575.03 1,424.97 2,000.00 66,138.85 82 66,138.85 562.90 1,437.10 2,000.00 64,701.74 83 64,701.74 550.67 1,449.33 2,000.00 63,252.41 84 63,252.41 538.33 1,461.67 2,000.00 61,790.75 85 61,790.75 525.89 1,474.11 2,000.00 60,316.64 86 60,316.64 513.35 1,486.65 2,000.00 58,829.99 87 58,829.99 500.69 1,499.31 2,000.00 57,330.68 88 57,330.68 487.93 1,512.07 2,000.00 55,818.62 89 55,818.62 475.07 1,524.93 2,000.00 54,293.68 90 54,293.68 462.09 1,537.91 2,000.00 52,755.77
91 52,755.77 449.00 1,551.00 2,000.00 51,204.77 92 51,204.77 435.80 1,564.20 2,000.00 49,640.56 93 49,640.56 422.48 1,577.52 2,000.00 48,063.05 94 48,063.05 409.06 1,590.94 2,000.00 46,472.11 95 46,472.11 395.52 1,604.48 2,000.00 44,867.63 96 44,867.63 381.86 1,618.14 2,000.00 43,249.49 97 43,249.49 368.09 1,631.91 2,000.00 41,617.58 98 41,617.58 354.20 1,645.80 2,000.00 39,971.78 99 39,971.78 340.19 1,659.81 2,000.00 38,311.98 100 38,311.98 326.07 1,673.93 2,000.00 36,638.04 101 36,638.04 311.82 1,688.18 2,000.00 34,949.87 102 34,949.87 297.45 1,702.55 2,000.00 33,247.32 103 33,247.32 282.96 1,717.04 2,000.00 31,530.28 104 31,530.28 268.35 1,731.65 2,000.00 29,798.63 105 29,798.63 253.61 1,746.39 2,000.00 28,052.25 106 28,052.25 238.75 1,761.25 2,000.00 26,291.00 107 26,291.00 223.76 1,776.24 2,000.00 24,514.76 108 24,514.76 208.64 1,791.36 2,000.00 22,723.40 109 22,723.40 193.40 1,806.60 2,000.00 20,916.79 110 20,916.79 178.02 1,821.98 2,000.00 19,094.81 111 19,094.81 162.51 1,837.49 2,000.00 17,257.33 112 17,257.33 146.87 1,853.13 2,000.00 15,404.20 113 15,404.20 131.10 1,868.90 2,000.00 13,535.31 114 13,535.31 115.20 1,884.80 2,000.00 11,650.50 115 11,650.50 99.16 1,900.84 2,000.00 9,749.66 116 9,749.66 82.98 1,917.02 2,000.00 7,832.64 117 7,832.64 66.66 1,933.34 2,000.00 5,899.30 118 5,899.30 50.21 1,949.79 2,000.00 3,949.51 119 3,949.51 33.61 1,966.39 2,000.00 1,983.12 120 1,983.12 16.88 1,983.12 2,000.00 0.00
from amort.table 107,333.82 =F55 using PV function $107,333.82 =PV(B4,(B3-4)*12,-B2,,0) =SUM(F3:F4) Formulatext Interest payment Principal payment =B1 =B8*$B$4 =E8-C8 =$B$2 =B8-D8 =F8 =B9*$B$4 =E9-C9 =$B$2 =B9-D9 =F9 =B10*$B$4 =E10-C10 =$B$2 =B10-D10 =F10 =B11*$B$4 =E11-C11 =$B$2 =B11-D11 =F11 =B12*$B$4 =E12-C12 =$B$2 =B12-D12 =F12 =B13*$B$4 =E13-C13 =$B$2 =B13-D13 =F13 =B14*$B$4 =E14-C14 =$B$2 =B14-D14 =F14 =B15*$B$4 =E15-C15 =$B$2 =B15-D15 =F15 =B16*$B$4 =E16-C16 =$B$2 =B16-D16 =F16 =B17*$B$4 =E17-C17 =$B$2 =B17-D17 =F17 =B18*$B$4 =E18-C18 =$B$2 =B18-D18 =F18 =B19*$B$4 =E19-C19 =$B$2 =B19-D19 =F19 =B20*$B$4 =E20-C20 =$B$2 =B20-D20 =F20 =B21*$B$4 =E21-C21 =$B$2 =B21-D21 =F21 =B22*$B$4 =E22-C22 =$B$2 =B22-D22 =F22 =B23*$B$4 =E23-C23 =$B$2 =B23-D23 =F23 =B24*$B$4 =E24-C24 =$B$2 =B24-D24 =F24 =B25*$B$4 =E25-C25 =$B$2 =B25-D25 =F25 =B26*$B$4 =E26-C26 =$B$2 =B26-D26 =F26 =B27*$B$4 =E27-C27 =$B$2 =B27-D27 =F27 =B28*$B$4 =E28-C28 =$B$2 =B28-D28 =F28 =B29*$B$4 =E29-C29 =$B$2 =B29-D29 =F29 =B30*$B$4 =E30-C30 =$B$2 =B30-D30 =F30 =B31*$B$4 =E31-C31 =$B$2 =B31-D31 =F31 =B32*$B$4 =E32-C32 =$B$2 =B32-D32 =F32 =B33*$B$4 =E33-C33 =$B$2 =B33-D33 =F33 =B34*$B$4 =E34-C34 =$B$2 =B34-D34 =F34 =B35*$B$4 =E35-C35 =$B$2 =B35-D35 =F35 =B36*$B$4 =E36-C36 =$B$2 =B36-D36 =F36 =B37*$B$4 =E37-C37 =$B$2 =B37-D37 =F37 =B38*$B$4 =E38-C38 =$B$2 =B38-D38 =F38 =B39*$B$4 =E39-C39 =$B$2 =B39-D39 =F39 =B40*$B$4 =E40-C40 =$B$2 =B40-D40 =F40 =B41*$B$4 =E41-C41 =$B$2 =B41-D41 =F41 =B42*$B$4 =E42-C42 =$B$2 =B42-D42 =F42 =B43*$B$4 =E43-C43 =$B$2 =B43-D43 =F43 =B44*$B$4 =E44-C44 =$B$2 =B44-D44 =F44 =B45*$B$4 =E45-C45 =$B$2 =B45-D45 3) Outstanding balance after 4 years =PPMT(B4,5,B3*1 2,-B1,,0) =IPMT(B4,5,B3*12 ,-B1,,0) Beginning loan balance Total payment Ending loan balance
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=F45 =B46*$B$4 =E46-C46 =$B$2 =B46-D46 =F46 =B47*$B$4 =E47-C47 =$B$2 =B47-D47 =F47 =B48*$B$4 =E48-C48 =$B$2 =B48-D48 =F48 =B49*$B$4 =E49-C49 =$B$2 =B49-D49 =F49 =B50*$B$4 =E50-C50 =$B$2 =B50-D50 =F50 =B51*$B$4 =E51-C51 =$B$2 =B51-D51 =F51 =B52*$B$4 =E52-C52 =$B$2 =B52-D52 =F52 =B53*$B$4 =E53-C53 =$B$2 =B53-D53 =F53 =B54*$B$4 =E54-C54 =$B$2 =B54-D54 =F54 =B55*$B$4 =E55-C55 =$B$2 =B55-D55 =F55 =B56*$B$4 =E56-C56 =$B$2 =B56-D56 =F56 =B57*$B$4 =E57-C57 =$B$2 =B57-D57 =F57 =B58*$B$4 =E58-C58 =$B$2 =B58-D58 =F58 =B59*$B$4 =E59-C59 =$B$2 =B59-D59 =F59 =B60*$B$4 =E60-C60 =$B$2 =B60-D60 =F60 =B61*$B$4 =E61-C61 =$B$2 =B61-D61 =F61 =B62*$B$4 =E62-C62 =$B$2 =B62-D62 =F62 =B63*$B$4 =E63-C63 =$B$2 =B63-D63 =F63 =B64*$B$4 =E64-C64 =$B$2 =B64-D64 =F64 =B65*$B$4 =E65-C65 =$B$2 =B65-D65 =F65 =B66*$B$4 =E66-C66 =$B$2 =B66-D66 =F66 =B67*$B$4 =E67-C67 =$B$2 =B67-D67 =F67 =B68*$B$4 =E68-C68 =$B$2 =B68-D68 =F68 =B69*$B$4 =E69-C69 =$B$2 =B69-D69 =F69 =B70*$B$4 =E70-C70 =$B$2 =B70-D70 =F70 =B71*$B$4 =E71-C71 =$B$2 =B71-D71 =F71 =B72*$B$4 =E72-C72 =$B$2 =B72-D72 =F72 =B73*$B$4 =E73-C73 =$B$2 =B73-D73 =F73 =B74*$B$4 =E74-C74 =$B$2 =B74-D74 =F74 =B75*$B$4 =E75-C75 =$B$2 =B75-D75 =F75 =B76*$B$4 =E76-C76 =$B$2 =B76-D76 =F76 =B77*$B$4 =E77-C77 =$B$2 =B77-D77 =F77 =B78*$B$4 =E78-C78 =$B$2 =B78-D78 =F78 =B79*$B$4 =E79-C79 =$B$2 =B79-D79 =F79 =B80*$B$4 =E80-C80 =$B$2 =B80-D80 =F80 =B81*$B$4 =E81-C81 =$B$2 =B81-D81 =F81 =B82*$B$4 =E82-C82 =$B$2 =B82-D82 =F82 =B83*$B$4 =E83-C83 =$B$2 =B83-D83 =F83 =B84*$B$4 =E84-C84 =$B$2 =B84-D84 =F84 =B85*$B$4 =E85-C85 =$B$2 =B85-D85 =F85 =B86*$B$4 =E86-C86 =$B$2 =B86-D86 =F86 =B87*$B$4 =E87-C87 =$B$2 =B87-D87 =F87 =B88*$B$4 =E88-C88 =$B$2 =B88-D88 =F88 =B89*$B$4 =E89-C89 =$B$2 =B89-D89 =F89 =B90*$B$4 =E90-C90 =$B$2 =B90-D90 =F90 =B91*$B$4 =E91-C91 =$B$2 =B91-D91 =F91 =B92*$B$4 =E92-C92 =$B$2 =B92-D92 =F92 =B93*$B$4 =E93-C93 =$B$2 =B93-D93 =F93 =B94*$B$4 =E94-C94 =$B$2 =B94-D94 =F94 =B95*$B$4 =E95-C95 =$B$2 =B95-D95 =F95 =B96*$B$4 =E96-C96 =$B$2 =B96-D96 =F96 =B97*$B$4 =E97-C97 =$B$2 =B97-D97
=F97 =B98*$B$4 =E98-C98 =$B$2 =B98-D98 =F98 =B99*$B$4 =E99-C99 =$B$2 =B99-D99 =F99 =B100*$B$4 =E100-C100 =$B$2 =B100-D100 =F100 =B101*$B$4 =E101-C101 =$B$2 =B101-D101 =F101 =B102*$B$4 =E102-C102 =$B$2 =B102-D102 =F102 =B103*$B$4 =E103-C103 =$B$2 =B103-D103 =F103 =B104*$B$4 =E104-C104 =$B$2 =B104-D104 =F104 =B105*$B$4 =E105-C105 =$B$2 =B105-D105 =F105 =B106*$B$4 =E106-C106 =$B$2 =B106-D106 =F106 =B107*$B$4 =E107-C107 =$B$2 =B107-D107 =F107 =B108*$B$4 =E108-C108 =$B$2 =B108-D108 =F108 =B109*$B$4 =E109-C109 =$B$2 =B109-D109 =F109 =B110*$B$4 =E110-C110 =$B$2 =B110-D110 =F110 =B111*$B$4 =E111-C111 =$B$2 =B111-D111 =F111 =B112*$B$4 =E112-C112 =$B$2 =B112-D112 =F112 =B113*$B$4 =E113-C113 =$B$2 =B113-D113 =F113 =B114*$B$4 =E114-C114 =$B$2 =B114-D114 =F114 =B115*$B$4 =E115-C115 =$B$2 =B115-D115 =F115 =B116*$B$4 =E116-C116 =$B$2 =B116-D116 =F116 =B117*$B$4 =E117-C117 =$B$2 =B117-D117 =F117 =B118*$B$4 =E118-C118 =$B$2 =B118-D118 =F118 =B119*$B$4 =E119-C119 =$B$2 =B119-D119 =F119 =B120*$B$4 =E120-C120 =$B$2 =B120-D120 =F120 =B121*$B$4 =E121-C121 =$B$2 =B121-D121 =F121 =B122*$B$4 =E122-C122 =$B$2 =B122-D122 =F122 =B123*$B$4 =E123-C123 =$B$2 =B123-D123 =F123 =B124*$B$4 =E124-C124 =$B$2 =B124-D124 =F124 =B125*$B$4 =E125-C125 =$B$2 =B125-D125 =F125 =B126*$B$4 =E126-C126 =$B$2 =B126-D126 =F126 =B127*$B$4 =E127-C127 =$B$2 =B127-D127
Loan amount $ 100,000 8% Term (in years) 10 1) Year Ending balance 1 100,000.00 10,000.00 8,000.00 18,000.00 90,000.00 2 90,000.00 10,000.00 7,200.00 17,200.00 80,000.00 3 80,000.00 10,000.00 6,400.00 16,400.00 70,000.00 4 70,000.00 10,000.00 5,600.00 15,600.00 60,000.00 5 60,000.00 10,000.00 4,800.00 14,800.00 50,000.00 6 50,000.00 10,000.00 4,000.00 14,000.00 40,000.00 7 40,000.00 10,000.00 3,200.00 13,200.00 30,000.00 8 30,000.00 10,000.00 2,400.00 12,400.00 20,000.00 9 20,000.00 10,000.00 1,600.00 11,600.00 10,000.00 10 10,000.00 10,000.00 800.00 10,800.00 0.00 2) What is the ending loan balance afteer 3rd payment? w/ amort.table 70,000.00 =F9 wo amort.table $ 70,000 =B2-3*(B2/B4) 3) What are the 9th principal, interest, and total repayment? w/ amort.table $ 10,000 $ 1,600 $ 11,600 =C15 =D15 =E15 wo amort.table $ 10,000 $ 1,600 $ 11,600 =B2/B4 =(B2-8*B2/B4)*B3 =B25+C25 Amortization Table: $100,000 10 year, 8% Equal Amortization Term loan Interest rate (APR) Beginning balance Principal repayment Interest payment Total payment
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1 2 3 4 5 6 7 8 9 10 0.00 10,000.00 20,000.00 30,000.00 40,000.00 50,000.00 60,000.00 70,000.00 80,000.00 90,000.00 100,000.00 $100,000 8%, 10 YEAR LOAN ENDIG BALANCES Equal amortization teerm loan Equal payment loan
AMORTIZATION TABLE: INTEREST-ONLY LOAN Loan amount $ 100,000 Interest rate (APR) 8% Term (in years) 10 Year 1 $100,000 $0 $8,000 $8,000 $100,000 =B2 2 $100,000 $0 $8,000 $8,000 $100,000 =F7 3 $100,000 $0 $8,000 $8,000 $100,000 =F8 4 $100,000 $0 $8,000 $8,000 $100,000 =F9 5 $100,000 $0 $8,000 $8,000 $100,000 =F10 6 $100,000 $0 $8,000 $8,000 $100,000 =F11 7 $100,000 $0 $8,000 $8,000 $100,000 =F12 8 $100,000 $0 $8,000 $8,000 $100,000 =F13 9 $100,000 $0 $8,000 $8,000 $100,000 =F14 10 $100,000 $100,000 $8,000 $108,000 $0 =F15 2) What is the ending loan balance after 3rd payment? w/ amort.table 100,000.00 =F9 wo amort.table $ 100,000 =B2 3) What are the 9th principal, interest, and total repayment? w/ amort.table $ 0 $ 8,000 $ 8,000 =C15 =D15 =E15 wo amort.table $ 0 $ 8,000 $ 8,000 #N/A =B2*B3 =B24+C24 Beginning balance Principal repayment Interest payment Total payment Ending balance Beginning balance Microsoft Office User: set this to equal to the beg.balance of the last period
formulatext #N/A =B7*$B$3 =D7+C7 =B7-C7 #N/A =B8*$B$3 =D8+C8 =B8-C8 #N/A =B9*$B$3 =D9+C9 =B9-C9 #N/A =B10*$B$3 =D10+C10 =B10-C10 #N/A =B11*$B$3 =D11+C11 =B11-C11 #N/A =B12*$B$3 =D12+C12 =B12-C12 #N/A =B13*$B$3 =D13+C13 =B13-C13 #N/A =B14*$B$3 =D14+C14 =B14-C14 #N/A =B15*$B$3 =D15+C15 =B15-C15 =B16 =B16*$B$3 =D16+C16 =B16-C16 Principal repayment Interest payment Total payment Ending balance 1 2 3 4 5 6 7 8 9 10 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $100,000, 8%, 10 year interest-only loan Principal repayment Interest payment Ending balance
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Loan $10,000 6% Month 1 10,000.00 0.00 50.00 50.00 10,000.00 =B1 #N/A 2 10,000.00 0.00 50.00 50.00 10,000.00 =F5 #N/A 3 10,000.00 0.00 50.00 50.00 10,000.00 =F6 #N/A 4 10,000.00 0.00 50.00 50.00 10,000.00 =F7 #N/A 5 10,000.00 0.00 50.00 50.00 10,000.00 =F8 #N/A 6 10,000.00 0.00 50.00 50.00 10,000.00 =F9 #N/A 7 10,000.00 0.00 50.00 50.00 10,000.00 =F10 #N/A 8 10,000.00 0.00 50.00 50.00 10,000.00 =F11 #N/A 9 10,000.00 0.00 50.00 50.00 10,000.00 =F12 #N/A 10 10,000.00 0.00 50.00 50.00 10,000.00 =F13 #N/A 11 10,000.00 0.00 50.00 50.00 10,000.00 =F14 #N/A 12 10,000.00 0.00 50.00 50.00 10,000.00 =F15 #N/A 13 10,000.00 0.00 50.00 50.00 10,000.00 =F16 #N/A 14 10,000.00 0.00 50.00 50.00 10,000.00 =F17 #N/A 15 10,000.00 0.00 50.00 50.00 10,000.00 =F18 #N/A 16 10,000.00 0.00 50.00 50.00 10,000.00 =F19 #N/A 17 10,000.00 0.00 50.00 50.00 10,000.00 =F20 #N/A 18 10,000.00 0.00 50.00 50.00 10,000.00 =F21 #N/A 19 10,000.00 0.00 50.00 50.00 10,000.00 =F22 #N/A 20 10,000.00 0.00 50.00 50.00 10,000.00 =F23 #N/A 21 10,000.00 0.00 50.00 50.00 10,000.00 =F24 #N/A 22 10,000.00 0.00 50.00 50.00 10,000.00 =F25 #N/A 23 10,000.00 0.00 50.00 50.00 10,000.00 =F26 #N/A 24 10,000.00 10,000.00 50.00 10,050.00 0.00 =F27 =B28 Interest rate (APR) Beginning balance Principal repayment Interest payment Total payment Ending balance
=B5*$B$2/12 =D5+C5 =B5-C5 =B6*$B$2/12 =D6+C6 =B6-C6 =B7*$B$2/12 =D7+C7 =B7-C7 =B8*$B$2/12 =D8+C8 =B8-C8 =B9*$B$2/12 =D9+C9 =B9-C9 =B10*$B$2/12 =D10+C10 =B10-C10 =B11*$B$2/12 =D11+C11 =B11-C11 =B12*$B$2/12 =D12+C12 =B12-C12 =B13*$B$2/12 =D13+C13 =B13-C13 =B14*$B$2/12 =D14+C14 =B14-C14 =B15*$B$2/12 =D15+C15 =B15-C15 =B16*$B$2/12 =D16+C16 =B16-C16 =B17*$B$2/12 =D17+C17 =B17-C17 =B18*$B$2/12 =D18+C18 =B18-C18 =B19*$B$2/12 =D19+C19 =B19-C19 =B20*$B$2/12 =D20+C20 =B20-C20 =B21*$B$2/12 =D21+C21 =B21-C21 =B22*$B$2/12 =D22+C22 =B22-C22 =B23*$B$2/12 =D23+C23 =B23-C23 =B24*$B$2/12 =D24+C24 =B24-C24 =B25*$B$2/12 =D25+C25 =B25-C25 =B26*$B$2/12 =D26+C26 =B26-C26 =B27*$B$2/12 =D27+C27 =B27-C27 =B28*$B$2/12 =D28+C28 =B28-C28
Loan amount $ 100,000 8% Term (in years) 10 Annual payment $ 6,000 Year 1 100,000.00 -2,000.00 8,000.00 6,000.00 102,000.00 =B2 2 102,000.00 -2,160.00 8,160.00 6,000.00 104,160.00 =F7 3 104,160.00 -2,332.80 8,332.80 6,000.00 106,492.80 =F8 4 106,492.80 -2,519.42 8,519.42 6,000.00 109,012.22 =F9 5 109,012.22 -2,720.98 8,720.98 6,000.00 111,733.20 =F10 6 111,733.20 -2,938.66 8,938.66 6,000.00 114,671.86 =F11 7 114,671.86 -3,173.75 9,173.75 6,000.00 117,845.61 =F12 8 117,845.61 -3,427.65 9,427.65 6,000.00 121,273.26 =F13 9 121,273.26 -3,701.86 9,701.86 6,000.00 124,975.12 =F14 10 124,975.12 124,975.12 9,998.01 134,973.12 0.00 =F15 2) What is the ending loan balance after 3rd payment? w/ amort.table 106,492.80 =F9 wo amort.table 3) What are the 9th principal, interest, and total repayment? w/ amort.table $ -3,702 $ 9,702 $ 6,000 =C15 =D15 =E15 wo amort.table $ 6,000 #N/A #N/A =B5 AMORTIZATION TABLE: BALLOON LOAN Some or all of the principal repayments are negative Interest rate (APR) Beginning balance Principal repayment Interest payment Total payment Ending balance Beginnin g balance not easy to answer without the amort. table not easy to answer without the amort. table not easy to answer without the amort. table Microsoft Office User: Should be equal to the beginning balance at the last period Microsoft Office User: It is determined after computing the interest principal repayments A B C D E F G 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
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FORMULATEXT =E7-D7 =B7*$B$3 =$B$5 =B7-C7 =E8-D8 =B8*$B$3 =$B$5 =B8-C8 =E9-D9 =B9*$B$3 =$B$5 =B9-C9 =E10-D10 =B10*$B$3 =$B$5 =B10-C10 =E11-D11 =B11*$B$3 =$B$5 =B11-C11 =E12-D12 =B12*$B$3 =$B$5 =B12-C12 =E13-D13 =B13*$B$3 =$B$5 =B13-C13 =E14-D14 =B14*$B$3 =$B$5 =B14-C14 =E15-D15 =B15*$B$3 =$B$5 =B15-C15 =B16 =B16*$B$3 =C16+D16=B16-C16 Principal repayment Interest payment Total payment Ending balance 1 2 3 4 5 6 0.00 20,000.00 40,000.00 60,000.00 80,000.00 100,000.00 120,000.00 140,000.00 Ending balances of $100,000 1 Ballon loan Inter Equal payment loan Equa and H I J K L M N O P 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
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7 8 9 10 10 year, 8% loan rest only loan al Amort.term loan Q R S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
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AMORTIZATION TABLE: BULLET LOAN Loan amount $100,000.00 Interest rate (APR) 8% Term (in years) 10 Year 1 $100,000.00 -$8,000.00 $8,000.00 $0.00 $108,000.00 =B2 2 $108,000.00 -$8,640.00 $8,640.00 $0.00 $116,640.00 =F7 3 $116,640.00 -$9,331.20 $9,331.20 $0.00 $125,971.20 =F8 4 $125,971.20 -$10,077.70 $10,077.70 $0.00 $136,048.90 =F9 5 $136,048.90 -$10,883.91 $10,883.91 $0.00 $146,932.81 =F10 6 $146,932.81 -$11,754.62 $11,754.62 $0.00 $158,687.43 =F11 7 $158,687.43 -$12,694.99 $12,694.99 $0.00 $171,382.43 =F12 8 $171,382.43 -$13,710.59 $13,710.59 $0.00 $185,093.02 =F13 9 $185,093.02 -$14,807.44 $14,807.44 $0.00 $199,900.46 =F14 10 $199,900.46 $199,900.46 $15,992.04 $215,892.50 $0.00 =F15 $ 215,892.50 =B2*(1+B3)^B4 2) What is the ending loan balance after 3rd payment? w/ amort.table $125,971.20 =F9 wo amort.table $125,971.20 =B2*(1+B3)^3 3) What are the 9th principal, interest, and total repayment? w/ amort.table -$14,807.44 $14,807.44 $0.00 =C15 =D15 #N/A wo amort.table $0.00 #N/A #N/A #N/A Beginning balance Principal repayment Interest payment Total payment Ending balance Beginning balance not easy without the amort. table not easy without the amort. table $ $1 $1 $2 $2
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FORMULATEXT =E7-D7 =B7*$B$3 #N/A =B7-C7 =E8-D8 =B8*$B$3 #N/A =B8-C8 =E9-D9 =B9*$B$3 #N/A =B9-C9 =E10-D10 =B10*$B$3 #N/A =B10-C10 =E11-D11 =B11*$B$3 #N/A =B11-C11 =E12-D12 =B12*$B$3 #N/A =B12-C12 =E13-D13 =B13*$B$3 #N/A =B13-C13 =E14-D14 =B14*$B$3 #N/A =B14-C14 =E15-D15 =B15*$B$3 #N/A =B15-C15 =B16 =B16*$B$3 =C16+D16 =B16-C16 Principal repayment Interest payment Total payment Ending balance 1 2 3 4 5 6 7 8 9 10 $0.00 $50,000.00 100,000.00 150,000.00 200,000.00 250,000.00 Ending balances of $100,000, 10 year, 8% loan Bullet loan Balloon loan with $6000 payment Interest only loan Equal payment loan Equal amot.term loan
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Original loan: 10 years, 8%, interest-only loan New loan: 8 years, 5%, intere $ Loan $100,000 Refinancing costs $10,000 Interest rate (APR) Term (in years) Term (in years) $ New loan Original loan: Amortization table, years 1-10 Year Total payment 1 2 3 4 5 6 7 8 9 10 New loan: Amortization table, years 3-10 Year Total payment 3 4 5 6 7 8 9 10 Confirming the refinancing gain Year Gain REFINANCING THE INTEREST ONLY LOAN End of year 2, refinancing costs: $10,000 Interest rate (APR) Contractual value at the end of year 2 Market value at the end of year 2 Gain from refinancing Beginning balance Principal repayment Interest payment Ending balance Beginning balance Principal repayment Interest payment Ending balance Payment on original loan Payment on new loan A B C D E F 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
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3 4 5 6 7 8 9 10 Potential refinancing gain A B C D E F 38 39 40 41 42 43 44 45 46 47
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est-only loan Beginning balance Principal repayme nt Interest payment Total payment Ending balance Beginning balance Principal repayme nt Interest payment Total payment Ending balance Microsoft Office User: Market value at the end of year 2 = PV of all remaining total payments from year 3 to year 10 G H I J K 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
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$ Loan Refinancing costs Interest rate (APR) Interest rate (APR) Term (in years) Term (in years) $ New loan Gain from refinancing Original loan: Amortization table, years 1-10 Year Total payment 1 2 3 4 5 6 7 8 9 10 New loan: Amortization table, years 3-10 Year Total payment 3 4 5 6 7 8 9 10 Confirming the refinancing gain Year Gain REFINANCING THE BALLOON LOAN End of year 2, refinancing costs: $10,000 Original loan: 10 years, 8%, balloon loan, 3,000 annual payment New loan: 8 years, Contractual value at the end of year 2 Market value at the end of year 2 Beginning balance Principal repayment Interest payment Beginning balance Principal repayment Interest payment Payment on original loan Payment on new loan A B C D E 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
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3 4 5 6 7 8 9 10 Refinancing gain A B C D E 38 39 40 41 42 43 44 45 46 47
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Ending balance Ending balance 5%, balloon loan, $3,000 annual payment Beginning balance Principal repayme nt Interest payment Total payment Ending balance Beginning balance Principal repayme nt Interest payment Total payment Ending balance Microsoft Office User: Market value at the end of year 2 = PV of all remaining total payments from year 3 to year 10 F G H I J K 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
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F G H I J K 38 39 40 41 42 43 44 45 46 47
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Refinancing the equal payment term loan at the end of year New loan: 8 years, Equal payme $ Loan Refinancing costs Interest rate (APR) Interest rate (APR) Term (in years) Term (in years) $ New loan Gain from refinancing Old equal payment term loan for 10 years at 8% Year Total payment 1 2 3 4 5 6 7 8 9 10 Year Total payment 3 4 5 6 7 8 9 10 Saving each year for the remaining 8 years Year annual savings 3 4 5 6 7 8 9 10 Original loan: 10 years, Equal payment loan at 8% Contractual value at the end of year 2 Market value at the end of year 2 Beginning balance Principal repayment Interest payment Ending balance New equal payment term loan for the remaining 8 years at 5% Beginning balance Principal repayment Interest payment Ending balance
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Gain from refinancing =>
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2 ent loan at 5% Total payment Total payment Beginning balance Principal repayment Interest payment Ending balance Beginning balance Principal repayment Interest payment Ending balance Microsoft Office User: Market value at the end of year 2 = PV of all remaining total payments from year 3 to year 10
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