Tedros borrowed $2 million and planned to repay the loan by making equal month-end payments over a period of 10 years. The interest rate on the loan is 6%, compounded monthly. Calculate the total amount of principal repaid and interest paid in the first 60 monthly payments. Assume that the relevant interest rate is still 6%, compounded monthly (that is, not 8%). [Hint: One make-sense way to think about this is by focusing on the relationships between amount borrowed, total amount repaid to the bank and the amount still owed to the bank after the 60th payment is made. You may think of the total amount of principal repaid first].
Tedros borrowed $2 million and planned to repay the loan by making equal month-end payments over a period of 10 years. The interest rate on the loan is 6%, compounded monthly. Calculate the total amount of principal repaid and interest paid in the first 60 monthly payments. Assume that the relevant interest rate is still 6%, compounded monthly (that is, not 8%). [Hint: One make-sense way to think about this is by focusing on the relationships between amount borrowed, total amount repaid to the bank and the amount still owed to the bank after the 60th payment is made. You may think of the total amount of principal repaid first].
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 17P
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Tedros borrowed $2 million and planned to repay the loan by making equal month-end payments over a period of 10 years. The interest rate on the loan is 6%, compounded monthly.
Calculate the total amount of principal repaid and interest paid in the first 60 monthly payments. Assume that the relevant interest rate is still 6%, compounded monthly (that is, not 8%).
[Hint: One make-sense way to think about this is by focusing on the relationships between amount borrowed, total amount repaid to the bank and the amount still owed to the bank after the 60th payment is made. You may think of the total amount of principal repaid first].
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