Messi borrowed GH¢ 150,000 from SOS Bank at 14% annual interest rate to be paid over three years. The loan is amortized into three equal annua end-of-year payments. Required: Calculate the annual end-of-year-loan payment.

Messi borrowed GH¢ 150,000 from SOS Bank at 14% annual interest rate to be paid over three years. The loan is amortized into three equal annua end-of-year payments. Required: Calculate the annual end-of-year-loan payment.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 9P

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Concept explainers

Amortized Loans

The term "amortization" refers to spreading the value of a loan or a debt over a series of regular payments or installments comprising of both the principal and interest amount. It generally involves the process where in the value of a loan or an intangible asset is written down over its maturity period.

Question

Messi borrowed GH¢ 150,000 from SOS Bank at 14% annual interest rate to be paid over three years. The loan is amortized into three equal annua end-of-year payments.

Required:

Calculate the annual end-of-year-loan payment.

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