Answered: Assume the following information for a…

Assume the following information for a car note: Original loan amount = $23,500 Annual interest rate = 7.25% Term of loan = 24 months What is the principal balance on the loan after six months?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 20P

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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.

Question

Assume the following information for a car note:

Original loan amount = $23,500 Annual interest rate = 7.25% Term of loan = 24 months

What is the principal balance on the loan after six months?

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