Answered: Oliver owes GH¢500 due in 4 months and…

Oliver owes GH¢500 due in 4 months and GH¢700 due in 9 months. What single payment (i) now, (ii) in 6 months, (iii) in 1 year, will liquidate these obligations if money is worth 11%.

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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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.

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Oliver owes GH¢500 due in 4 months and GH¢700 due in 9 months. What single
payment (i) now, (ii) in 6 months, (iii) in 1 year, will liquidate these obligations if money is worth 11%.

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