Johnny has a loan for $50,000 at a rate of i(4) = 8% on which he makes quarterly payments of $2,000. In addition, Johnny is depositing $500 a quarter into an account earning i(4) = 4%: After how many periods will the account have enough money to repay the loan?

Johnny has a loan for $50,000 at a rate of i(4) = 8% on which he makes quarterly payments of $2,000. In addition, Johnny is depositing $500 a quarter into an account earning i(4) = 4%: After how many periods will the account have enough money to repay the loan?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 19PROB

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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

Johnny has a loan for $50,000 at a rate of i(4) = 8% on which he makes
quarterly payments of $2,000. In addition, Johnny is depositing $500 a quarter into
an account earning i(4) = 4%: After how many periods will the account have enough
money to repay the loan?

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