Explain well with proper step by step Answer. A declining-balance loan for $3000 entails paying about $275.00 for each of twelve months,for a total of about $3300 in payments. The loan's interest rate is 18% per year. How muchof the loan's second payment goes to paying interest?$41.55O $40.88O $45O $36.75O $42.58

Declining balance loans mean that interest amount is paid on the remaining amount of loan balance.…

Answered: A declining-balance loan for $3000…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 14P

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Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of 50,000. First City has offered Hawley the alternatives listed here. Calculate the effective annual interest rate for each alternative. Which alternative has the lowest effective annual interest rate? a. A 12% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year b. A 9% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year c. An 8.75% annual rate on a discounted loan, with a 15% compensating balance d. Interest figured as 8% of the 50,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the year
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)?
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A declining-balance loan for $3000 entails paying about $275.00 for each of twelve months, for a total of about $3300 in payments. The loan's interest rate is 18% per year. How much of the loan's second payment goes to paying interest? O $41.55 O $40.88 O $45 $36.75