solve asap the question (d) with complete explanation and get upvotes This problem is a complex financial problem that requires several skills, perhaps some from previous sections.Clark and Lana take a 30-year home mortgage of $125,000 at 7.6%, compounded monthly. They make their regular monthly paymentsfor 5 years, then decide to pay $1300 per month.(a) Find their regular monthly payment. (Round your answer to the nearest cent.)$125000 x(b) Find the unpaid balance when they begin paying the $1300. (Round your answer to the nearest cent.)$(c) How many payments of $1300 will it take to pay off the loan? (Round your answer to two decimal places.)monthly payments(d) How much interest will they save by paying the loan using the number of payments from part (c)? (Round your answer to thenearest cent.)

Answered: Clark and Lana take a 30-year home…

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter27: Time Value Of Money (compound)

Section: Chapter Questions

Problem 6E

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Samuel Ames owes 20,000 to a friend. He wants to know how much he would have to pay if he paid the debt in 3 annual installments at the end of each year, which would include interest at 14%. Draw a time line for the problem. Indicate what table to use. Look up the table value and place it in a brief formula. Solve.
Now assume that it is several years later. The brothers are concerned about the firm’s current credit terms of net 30, which means that contractors buying building products from the firm are not offered a discount and are supposed to pay the full amount in 30 days. Gross sales are now running $1,000,000 a year, and 80% (by dollar volume) of the firm’s paying customers generally pay the full amount on Day 30; the other 20% pay, on average, on Day 40. Of the firm’s gross sales, 2% ends up as bad-debt losses. The brothers are now considering a change in the firm’s credit policy. The change would entail: (1) changing the credit terms to 2/10, net 20, (2) employing stricter credit standards before granting credit, and (3) enforcing collections with greater vigor than in the past. Thus, cash customers and those paying within 10 days would receive a 2% discount, but all others would have to pay the full amount after only 20 days. The brothers believe the discount would both attract additional customers and encourage some existing customers to purchase more from the firm—after all, the discount amounts to a price reduction. Of course, these customers would take the discount and hence would pay in only 10 days. The net expected result is for sales to increase to $1,100,000; for 60% of the paying customers to take the discount and pay on the 10th day; for 30% to pay the full amount on Day 20; for 10% to pay late on Day 30; and for bad-debt losses to fall from 2% to 1% of gross sales. The firm’s operating cost ratio will remain unchanged at 75%, and its cost of carrying receivables will remain unchanged at 12%. To begin the analysis, describe the four variables that make up a firm’s credit policy and explain how each of them affects sales and collections.
Refer to the present value table information on the previous page. What amount should Brett have in his bank account today, before withdrawal, if he needs 2,000 each year for 4 years, with the first withdrawal to be made today and each subsequent withdrawal at 1-year intervals? (Brett is to have exactly a zero balance in his bank account after the fourth withdrawal.) a. 2,000 + (2,000 0.926) + (2,000 0. 857) + (2,000 0.794) b. 2,0000.7354 c. (2,000 0.926) + (2,000 0.857) + (2,000 0.794) + (2,000 0.735) d. 2,0000.9264
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

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