Answered: correct answers are i) = 16,775. ii) =…

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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correct answers are i) = 16,775. ii) = 15,293.38. iii) for a) 15,131.79 and for b) 167.64

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A loan is to be repaid by an annuity payable monthly in arrears over a 5-year period. The annuity starts at a rate of £200 per month and increases each month by £5. Repayments are calculated using a rate of interest of 8% per annum effective.

(i) Calculate the amount of the original loan to the nearest £.

(ii) Calculate the capital outstanding at the end of the first year (after the payment due has been made) to the nearest £0.01.

(iii) Hence, or otherwise, calculate the capital and interest components of the 13th and 14th payments.

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