Suppose you have two loans: one SR 2500 that is due 3 months from now with 5% annual simple interest and the other loan SR 1500 that is due 8 months from now. If you want to mix them in a single payment 10 months from now, how much would you pay given that the interest rate is 7%? *

Suppose you have two loans: one SR 2500 that is due 3 months from now with 5% annual simple interest and the other loan SR 1500 that is due 8 months from now. If you want to mix them in a single payment 10 months from now, how much would you pay given that the interest rate is 7%? *

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.

Question

Suppose you have two loans: one SR 2500
that is due 3 months from now with 5%
annual simple interest and the other loan SR
1500 that is due 8 months from now. If you
want to mix them in a single payment 10
months from now, how much would you pay
given that the interest rate is 7%? *

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