Ian loaned his friend $25,000 to start a new business. He considers this loan to be an investment, and therefore requires his friend to pay him an interest rate of 9% on the loan. He also expects his friend to pay back the loan over the next four years by making annual payments at the end of each year. Ian texted and asked that you help him calculate the annual payments that he should expect to receive so that he can recover his initial investment and earn the agreed-upon 9% on his investment. Calculate the annual payment and complete the following capital recovery schedule:   Year Beginning Amount Payment Interest Paid Principal Paid Ending Balance 1 $25,000.00                     2                          3                          4                     -$0.01

EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 23PROB
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14. Loan amortization and capital recovery

Ian loaned his friend $25,000 to start a new business. He considers this loan to be an investment, and therefore requires his friend to pay him an interest rate of 9% on the loan. He also expects his friend to pay back the loan over the next four years by making annual payments at the end of each year. Ian texted and asked that you help him calculate the annual payments that he should expect to receive so that he can recover his initial investment and earn the agreed-upon 9% on his investment.
Calculate the annual payment and complete the following capital recovery schedule:
 
Year
Beginning Amount
Payment
Interest Paid
Principal Paid
Ending Balance
1 $25,000.00                    
2                         
3                         
4                     -$0.01
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