Loan Basics nputs Present value nterest rate/year Number of years 325,000 4.00% 30 Present Value using a Time Line Year 10 15 25 30 Beginning Principal Balance Payment nterest component Principal component 20
Loan Basics nputs Present value nterest rate/year Number of years 325,000 4.00% 30 Present Value using a Time Line Year 10 15 25 30 Beginning Principal Balance Payment nterest component Principal component 20
Chapter6: Investing And Financing Activities
Section: Chapter Questions
Problem 3.5C
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Question
Transcribed Image Text:Loan
Basics
Inputs
Present value
325,000
Interest rate/year
Number of years
4.00%
30
Present Value using a Time Line
Year
10
15
20
25
30
Beginning Principal Balance
Payment
Interest component
Principal component
Transcribed Image Text:1. To purchase a house, you take out a 30 year mortgage. The present value (loan amount) of the mortgage is $325,000.
The mortgage charges an interest rate/year of 4.00%. What is the annual payment required by this mortgage? How
much of each year's payment goes to paying interest and how much goes to reducing the principal balance? Use
worksheet "Loan".
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