Answered: Taking out a 21 year loan at $59,000…

Taking out a 21 year loan at $59,000 with 6% APR compounded monthly, and with monthly payments, calculate the amount of your second principal payment. Round your final answer to one decimal place.

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

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

Taking out a 21 year loan at $59,000 with 6% APR compounded monthly, and with monthly payments, calculate the amount of your second principal payment. Round your final answer to one decimal place.

Expert Solution

Calculate the second principal payment as follows:

Therefore, second principal payment is $117.9.

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