ou are offered an add-on loan for $4,500 at 18% for 5 years. What is the monthly payment? What is the amount of interest? What is the true interest rate cost of this loan?
ou are offered an add-on loan for $4,500 at 18% for 5 years. What is the monthly payment? What is the amount of interest? What is the true interest rate cost of this loan?
Chapter4: Time Value Of Money
Section4.17: Amortized Loans
Problem 1ST
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Question
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You are offered an add-on loan for $4,500 at 18% for 5 years.
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What is the monthly payment?
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What is the amount of interest?
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What is the true interest rate cost of this loan?
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If you could pay the same loan above at a compound rate:
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What would the monthly payment be?
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What would the amount of interest be?
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Prepare a monthly payment schedule for each loan above using Excel, and submit it.
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Suppose that you are only allowed to make a balloon payment to the principal of the compound interest loan. You have $1,000 to put down at the beginning of year three. How many payments will you save?
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