A P28,000 debt at 15% interest compounded semi-annually is to be amortized at P2,250 every 6 months. A final smaller payment is to be made after the last regular payment. How many regular payments are needed? When will the final smaller payment be due? How much is the final payment?

A P28,000 debt at 15% interest compounded semi-annually is to be amortized at P2,250 every 6 months. A final smaller payment is to be made after the last regular payment. How many regular payments are needed? When will the final smaller payment be due? How much is the final payment?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.17: Amortized Loans

Problem 1ST

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

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A P28,000 debt at 15% interest compounded semi-annually is to be amortized at P2,250 every 6 months. A final smaller payment is to be made after the last regular payment.

How many regular payments are needed?
When will the final smaller payment be due?
How much is the final payment?

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