The loan is due at the end of 2 years(balloon loan). It has a balance of $5,000 and an interest rate of 10% that accrues semi-annually. The bank said they will take the present value of the loan. Do you have enough money to pay off the loan?

The loan is due at the end of 2 years(balloon loan). It has a balance of $5,000 and an interest rate of 10% that accrues semi-annually. The bank said they will take the present value of the loan. Do you have enough money to pay off the loan?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 14P

See similar textbooks

Related questions

Q: $5000 that you have to pay in 7 annual installments of $1100 each, the first one at the end of the…

A: The given problem relates to RATE function in excel. RATE function computes interest rate for no. of…

Q: In one instance, a financial institution loaned you $20,000 for two years at an apr of 4.75% for…

A: Interest refers to the cost of borrowing money from the lender.

Q: Suppose on January 1 you deposit $1000 in an account that pays a nominal, or quoted, interest rate…

A: Future value is the value of an asset that grows after a specific period of time. The future value…

Q: A car loan for $19,500 has an interest rate of 4.25% and is amortized over 60 months. What is the…

A: Monthly payment of loans is popularly also known as EMI ( Equated Monthly Installments) which is a…

Q: If I loaned 163,085 today and promised to pay it back after 5 years to the bank with monthly…

A: Loan amount (P) = 163,085 Annual interest rate = 0.11 Monthly interest rate (r) = 0.11/12 =…

Q: If you take out a 4 year loan for $16,500 at your bank and pay the quarterly payments for the 4…

A: Total interest is = total payments - loan

Q: enny puts $200 into a savings account today, the account pays an annual interest rate of 5%, but…

A: PV = 200, N = 1, rate = 5%/2, PMT = 0 use FV function in Excel balance in the account after 6 months…

Q: You borrow $ 1 million on a 10-year loan from a bank to finance the expansion of your business.…

A: Note: Since you have posted a question with multiple sub-parts, we will solve first three sub-parts…

Q: You deposit $10,000 in a bank that pays an annual interest rate of 6% compounded quarterly how much…

A: We need to use compound interest formula for calculation of amount after 5 years A=P(1+r)n Where…

Q: How much interest is payable each year on a loan of P2,000 if the interest rate is 10% simple…

A: Interest means the extra amount which we received because of investment made and will be paid in…

Q: Hamilton wants to accumulate ₺ 24.000 at the end of 4 years. It starts quarterly payments in a bank…

A: Amount at the end of 4 years = 24000 Total Terms(n) = 4*4 = 16 quarters Anbuak rate =6% Quarterly…

Q: A down town bank is advertising that if you deposit $1,000 with them, and leave it there for 65…

A: In the given question we requires to calculate the monthly interest rate paid by the bank. Details…

Q: Mr. Ramos is considering to pay his outstanding balance after 3 years of payment. The original…

A: PMT function: The PMT function is a type of financial function which helps to determine the total…

Q: Suppose you borrowed Php 30,000 on a student loan at a rate of 8% and must repay it in three (3)…

A: Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: Suppose that you borrow $8,000 now, promising to repay the loan principal plus accumulated interest…

A: The future value of an amount is the future worth of an amount calculated based on the time value…

Q: You overhear your friend saying that he is repaying a loan at P5,000 every month for the next three…

A: Using excel PV function

Q: The First Common Bank has advertised one of its loan offerings as follows: “We will lend you…

A: Interest: It can be defined as the cost incurred by the borrower related to the amount borrowed.

Q: You borrow $1,000 from the bank and agree to repay the loan over the next year in 12 equal monthly…

A: We can calculate the effective annual interest rate by applying the required formula taking the loan…

Q: Suppose that you borrow $10,000 for four years at 8% toward the purchase of a car. Find the monthly…

A: The amortization schedule shows the periodic loan payment owed for each period, the amount of…

Q: Suppose you are getting a loan from a bank to purchase a feed business. The interest rate on the…

A: APR(Annual percentage rate) refers to annual cost paid by the borrower for the loan taken which…

Q: Ferris Bueller has borrowed from the Ferrari Bank at a rate of 7% and will repay the laon with…

A: The current worth of the cash flows or an asset after discounting is termed as the present value.

Q: You have a bank deposit now worth $5000. How long will it take for your deposit to be worth more…

A: Interest is an additional amount which is earned on deposited amount for the period. It increases…

Q: If the bank quotes a loan APR of 9% per annum, compounded monthly, what do you have to pay back in 1…

A: Compound interest= P(1+r%/n)^tn Interest rate = 9% Borrow amount= 100

Q: National bank is willing to lend a customer P75,000. The note will be secured by a 5-year mortgage…

A: Installment Loan relates to giving money to prospective borrower in aggregate or lump-sum but…

Q: Assume you borrow $10,000 today and promise to repay the loan in two payments, one in year 2 and the…

A: Let, the size of the payment in 4th Year be X. The calculation of the value of X is as follows:

Q: A business received a for year $2,000,000 loan at an interest rate of 7% per year. The principal is…

A: NPV means PV of amount which is receive or pay in future. NPV can be find by using discounting rate…

Q: A man borrows Php10,000 from a loan firm. The rate of simple interest is 15%, but the interest is to…

A: Actual interest rate here will be calculated by dividing interest by net amount received. Actual…

Q: A bank offers a home buyer a 25-year loan at 7% per year. If the home buyer borrows $150,000 from…

A: A study that proves that the future worth of the money is lower than its current value due to…

Q: If you borrow $25,000 from a local finance company and you are required to pay $4,424.50 per year…

A: Borrowings are the liability of the company which is used to finance the requirement of the funds.…

Q: Bank JPX is offering personal loans of $35,000 to be repaid over 6 years with payments of $625 per…

A: Here, To Find: Effective annual rate (EAR) =?

Q: You plan to make five deposits of $1000 each, one every 6 months, with the first payment being made…

A: "In case when multiple questions are posted we will answer the first question when no other question…

Q: ou are offered an add-on loan for $4,500 at 18% for 5 years. What is the monthly payment? What is…

A: Since we answer up-to three sub-parts, we shall answer first three. Please resubmit a new question…

Q: Your bank account pays a nominal interest rate of 8%, compounded quarterly. You deposit $500 in the…

A: Here, Deposit today is $500 Deposit at the end of first year is $1,000 Interest Rate is 8%…

Q: Suppose you borrowed $ 15 000 at 8% monthly interest to repay it in monthly installments over 4…

A: Present value is the sum of money that must be invested in order to achieve a specific future goal.…

Q: The first national bank has agreed to lend you $30,000 today, but you must repay $42,135 in 3 years.…

A: Given: Present value =$30000Future value =$42135Time period =3 years

Q: !

A: Compound Interest Compound interest refers to the interest that includes interest on principal as…

Q: To purchase a new truck, you borrow $42,000. The bank offers an interest rate of 7.5% compounded…

A: Loan amount $ 42,000.00 Interest Rate 7.50% Time Period(Years) 5

Q: Ames Corporation has borrowed $5 million from a bank with the understanding that it will pay the…

A: monthly payment (pmt)formula: pmt=p×r1-1+r-n×m where, p= principal r=rate per frequency n=number of…

Q: You will be paying off a mortgage of $250,000 over the next 25 years. You have signed a loan…

A: A loan amortization table is a schedule of payments to pay back the loan in installments. It…

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1 Introduction

VIEW

Step 2 Calculation of Present Value

VIEW

Step 3 Conclusion

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

If Bergen Air Systems takes out a $100,000 loan, with eight equal principal payments due over the next eight years, how much will be accounted for as a current portion of a noncurrent note payable each year?
You put $600 in the bank for 3 years at 15%. A. If Interest Is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the third year. B. Use the future value of $1 table In Appendix B and verify that your answer is correct.
Cost of Bank Loan Mary Jones recently obtained an equipment loan from a local bank. The loan is for 15,000 with a nominal interest rate of 11%. However, this is an installment loan, so the bank also charges add-on interest. Mary must make monthly payments on the loan, and the loan is to be repaid in 1 year. What is the effective annual rate on the loan (assuming a 365-day year)?
You put $250 in the bank for S years at 12%. A. If interest is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the fifth year. B. Use the future value of $1 table in Appendix B and verity that your answer is correct.
Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate $4,200 over the next 6 years when the interest rate is 8%, how much do you need to deposit in the account? B. If you place $8,700 in a savings account, how much will you have at the end of 12 years with an interest rate of 8%? C. You invest $2,000 per year, at the end of the year, for 20 years at 10% interest. How much will you have at the end of 20 years? D. You win the lottery and can either receive $500,000 as a lump sum or $60,000 per year for 20 years. Assuming you can earn 3% interest, which do you recommend and why?
Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of 50,000. First City has offered Hawley the alternatives listed here. Calculate the effective annual interest rate for each alternative. Which alternative has the lowest effective annual interest rate? a. A 12% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year b. A 9% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year c. An 8.75% annual rate on a discounted loan, with a 15% compensating balance d. Interest figured as 8% of the 50,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the year
Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate $2,500 over the next 4 years when the interest rate is 15%, how much do you need to deposit in the account? B. If you place $6,200 in a savings account, how much will you have at the end of 7 years with a 12% interest rate? C. You invest $8,000 per year for 10 years at 12% interest, how much will you have at the end of 10 years? D. You win the lottery and can either receive $750,000 as a lump sum or $50,000 per year for 20 years. Assuming you can earn 8% interest, which do you recommend and why?