5) A bank authorization and avio loan is contracted for 150,000 pesos. The payment term is 3 years. The interest rate is 20% per year, convertible semiannually. What is the amount that must be paid if you decide to cancel it early after 15 months?

5) A bank authorization and avio loan is contracted for 150,000 pesos. The payment term is 3 years. The interest rate is 20% per year, convertible semiannually. What is the amount that must be paid if you decide to cancel it early after 15 months?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.

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5) A bank authorization and avio loan is contracted for 150,000 pesos. The payment term is 3
years. The interest rate is 20% per year, convertible semiannually. What is the amount that
must be paid if you decide to cancel it early after 15 months?

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Step 1: Calculate the effective annual rate as follows:

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Step 2: Calculate the remaining loan balance as follows:

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