A loan of $10,000 is repaid by 20 level installments at the end of every 6 months. The nominal rate of interest is 8%, convertible half yearly. Find the total amount of interest payment made over the 10-year period.
A loan of $10,000 is repaid by 20 level installments at the end of every 6 months. The nominal rate of interest is 8%, convertible half yearly. Find the total amount of interest payment made over the 10-year period.
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter7: Using Consumer Loans
Section: Chapter Questions
Problem 6FPE
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Question
1) A loan of $10,000 is repaid by 20 level installments at the end of every 6
months. The nominal rate of interest is 8%, convertible half yearly. Find the
total amount of interest payment made over the 10-year period.
Expert Solution
Step 1
Loan refers to the amount borrowed which creates liability for fund receiver and level installments is the equal amount of annuity payments. The interest payment serves as the cost for loan which will be ascertained by first computing total payment made with annuity then deducting $10,000 from same.
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