Bridgit has purchased a new home at auction for $655,000. To be able to pay for the house, she takes out a reducing balance loan from the bank for the sum of $520,000. The bank charges interest at the rate of 8.75%, compounding quarterly. Bridgit plans to pay off the loan over a period of 20 years. a. What quarterly instalment must Bridgit pay the bank? Express your answer to the nearest cent. b. How much interest will Bridgit pay over the period of the loan? 0 1 c. Complete the amortization table for the first 2 payments made on this loan. Quarter Payment Interest Principal reduction 2 0 Working space provided: 0 122 0 Balance $520,000
Bridgit has purchased a new home at auction for $655,000. To be able to pay for the house, she takes out a reducing balance loan from the bank for the sum of $520,000. The bank charges interest at the rate of 8.75%, compounding quarterly. Bridgit plans to pay off the loan over a period of 20 years. a. What quarterly instalment must Bridgit pay the bank? Express your answer to the nearest cent. b. How much interest will Bridgit pay over the period of the loan? 0 1 c. Complete the amortization table for the first 2 payments made on this loan. Quarter Payment Interest Principal reduction 2 0 Working space provided: 0 122 0 Balance $520,000
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 25PROB
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Transcribed Image Text:Bridgit has purchased a new home at auction for $655,000. To be able to pay for the house,
she takes out a reducing balance loan from the bank for the sum of $520,000. The bank
charges interest at the rate of 8.75%, compounding quarterly. Bridgit plans to pay off the
loan over a period of 20 years.
a. What quarterly instalment must Bridgit pay the bank? Express your answer to the
nearest cent.
b. How much interest will Bridgit pay over the period of the loan?
0
1
c. Complete the amortization table for the first 2 payments made on this loan.
Quarter
Payment
Interest
Principal
reduction
2
0
Working space provided:
0
0
Balance
$520,000
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