Answered: The of the present values of all the…

The of the present values of all the payments required to pay off a loan is equal to the original principal of the loan.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

ChapterP5: Part 5: Short-term Asset And Liability Management

Section: Chapter Questions

Problem 5Q

See similar textbooks

Related questions

Q: Finding the total interest of a loan is similar to finding the total interest in an annuity's

A: When you take a loan then you have to make payments towards the principal amount as well as towards…

Q: If you know the present value of an ordinary annuity, how can you find the PV of thecorresponding…

A: The question is based on the concept of annuity payment, an annuity is a series of equal payments…

Q: What is the difference between the present value of an annuity and the futurevalue of an annuity?

A: Annuity refers to a series of payments made at regular interval of time.

Q: a. Why is the present value of an annuity due equal to (1 + r) times the present value of an…

A: There are two types of annuities one is annuity due and annuity immediately.

Q: Explain the Compound or Future Value of an Annuity

A: The question is based on the concept of calculation of future value of periodic annuity payment.

Q: ) Find the amount and interest earned of the following ordinary annuity dues:

A: Annuity Due Payments: These payments involve that the payment is made at the commencement of each…

Q: Compute the present value of an ordinary annuity, an annuity due, and a deferred annuity.

A: Computation of the present value (PV) of an ordinary annuity can be done by using the…

Q: present value of a perpetual annuity? Seleccione una:

A: Perpetuity is defined as the series of fixed payments made each year for an indefinite period of…

Q: What is an annuity? How does it differ from a lump sum payment?

A: Annuity:An annuity refers to a series of payments made at regular time intervals. These are…

Q: The time value concept/calculation used in amortizing a loan is

A: Time value of money (TVM) means that the amount of money received in the present period will have…

Q: Calculate the present value of this annuity.

A: Present value (PV) of growing annuity refers to an annuity which shows the current value of all the…

Q: All of these have a balloon payment due at the end of the loan term EXCEPT a.a fully amortized…

A: A balloon loan is a type of loan that which do not fully amortize during the tenure of the loan. As…

Q: The future value of an annuity due is determined one period after the first cash flow in the series.…

A: As the annuity is due at the beginning of the period and the future value computed till the end of…

Q: a) How much is the loan amount going to be? b) What will your monthly payments be? c) How much total…

A: Loan Payments: These are payments comprising interest & principal amounts. Such payments are…

Q: a. How much is the monthly amortization? b. How much is the total interest?

A: Answer:

Q: The total amount of the annuity payments and the accumulated interest on those payments is known as…

A: Future value is based on the concept of time value of money which states that value of money today…

Q: The amount to be financed is $ Amount to be repaid is $ Monthly payment is $

A: Time value of money (TVM) is used to measure the value of money at different point of time in the…

Q: Which of the following cannot be calculated? Select one: a. the interest rate on perpetuity given…

A: Perpetuity is referred to as an annuity, which does not have an end or the stream of the cash…

Q: True or False? Please explain An annuity provides a stream of cash flows for a defined period of…

A: An annuity is a stream of cashflows over a certain period of time. There are two types of annuities:…

Q: What are some types of current assets that are pledged as security for short-term loans?

A: A pledged asset is collateral pledged by a borrower to a lender (usually in return for a loan). The…

Q: What is the process of calculating the remaining balance of different types of loans?

A: The remaining balance of a credit plan equation can be part of two sections, the future estimation…

Q: If the principal is 124,860 and the future value is 182,568 what is the value of the single payment…

A: single payment present worth factor =Present value (Principal) /Future Value

Q: Find the future value of each annuity due. Then determine how much of this value is from…

A: When an equal amount of payment is made in an equal time interval for a fixed number of times, it is…

Q: How much (in dollars) was borrowed at each simple interest rate,

A: A simple interest is the interest that is charged only on the principal amount. Unlike compound…

Q: An annuity is a kind of financial contract. What's the difference between this and a one-time…

A: An annuity is a fixed series of payments over the period and contains a number of cashflows.

Q: maturity value FV of the given loan amount.

A: Future Value is the compounding of present value at the specified interest rate

Q: What is the period of deferment of a deferred annuity?

A: Solution- Deferred Annuity- A deferred regular payment is a contract with an…

Q: The formula for the Present Value of Deferred Annuity is P

A: A deferred annuity refers to a contract with an insurance company in which the contract promises to…

Q: The ____ of an annuity is the sum of all payments plus all interest earned

A: As per Bartleby Honor Code, when multiple questions are asked, the expert is required only to solve…

Q: compounded quarterly, what was the loan principal?

A: Information Provided: Years = 20 Monthly payment = $1700 Interest rate = 5.70% compounded quarterly…

Q: The present value of an annuity due is: at the same point in time as the first payment. one period…

A: There are two types of annuities: 1. Ordinary annuity 2. Annuity due

Q: The principal P is borrowed and the loan's future value A at time t is given. Determine the loan's…

A: Simple Interest Rate: It is an easy method to compute interest on the loan. It is computed by…

Q: What is the formula in finding the present value of a deferred annuity

A: Deferred annuity is a type of contract which pays the purchaser a periodic payment or an lump sum…

Q: (a) How many payments will be paid? (b) What is the size of the final annuity payment?

A: Given in the question: Annuity Cash Value $12,000 Payment at the beginning of every six…

Q: How is the present value of an annuity determined?

A: Present value: Present value is the value of future cash flow today. Present value is the…

Q: If a person charges interest on a loan transaction equivalent to the inflation rate than will it be…

A: Time value of the money is the value of the money which a person must use in order to know how much…

Q: What is the interest rate the borrower will pay after the first rate adjustment?

A: Data given: Start rate = 3.50% Maximum cap for the first year=3% MTA index at the end of the first…

Q: Which of the following statement is true? a) An ordinary annuity is an annuity in which the cash…

A: Annuity can be annuity due or ordinary annuity

Q: The larger the periodic payment of an annuity, the greater its present value. True or False

A: Annuity is a series of payment. It is like a constant payment cashflow. Present value is the value…

Q: If you calculated the value of an ordinary annuity, how could you find the value ofthe corresponding…

A: Ordinary annuity is the series of regular payment in which the payment is made at the end of each…

Q: Using an annuity, you may calculate the present value of a single payment or a series of payments…

A: Annuities are combination of flow of payments that are widely used in insurance, loans and in…

Q: In the amortization of loans, interest must be paid at the beginning of each period calculated on…

A: Loans are amortized or paid off by way of scheduled and periodic regular payments. The payment…

Q: The ___________ of an annuity is the amount that must be invested now at interest rate i per time…

A: The Present value is arrived at by discounting the future cash flow using the interest rate. This is…

Concept explainers

Calculating the Return On A Loan

Question

The
of the present values of all the payments required to pay off a loan is
equal to the original principal of the loan.
square root
sum
economic rate
equivalent payment

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

VIEW

Step 2

VIEW

Step by step

Solved in 2 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, finance and related others by exploring similar questions and additional content below.

Similar questions

To account for a down payment, adjust the _____ of the loan by subtracting it from the loan amount. O present value (pv) future value (fv) rate O type
Define and give examples of the following: • Loan application • Break-even analysis • Pro-forma income projections • Pro-forma cash flow
What does the Excel argument Nper refer to? Number of periods of time for a loan or investment. The constant periodic payment required to pay off a loan or investment. Periodic interest rate. Present value of an investment.
What can you calculate with the Excel argument FV? Number of periods of time for a loan or investment. Interest rate. Future value of an investment based on a constant interest rate. The constant periodic payment required to pay off a loan or investment.
Create simple examples to illustrate the following concepts.i. Time value of moneyii. Effective interestiii. Sinking Fundiv. Amortized loan
What is the first step in calculating the lender's effective yield and calculating the borrower's effective cost of funds for loans? 1. Calculate the periodic loan payment based on the appraisal value. 2. Calculate the periodic loan payment based on the tax assessor's value. 3. Calculate the periodic payment based on the contract loan amount, nominal interest rate, and full amortization period. 4. All of the above.
Question #2. If we know the projected cash flows from loan notes and their current market value, what approach would we take to deducing the cost of the loan notes?
,Match the following terms with the appropriate definition.Effective yield or interest rateMonetary liabilityCompound interestPresent ValueFuture value of a single amountA.Fixed obligation to pay an amount in cash.B.The rate at which money will actually grow.C.Interest accumulates on interest.D.Current worth of future cash flows.E.The money to which an amount invested will grow over time.
The discount rate used in a net present value analysis is the ________. A. rate of interest earned on a savings account B. rate of inflation C. rate of interest charged for debt financing of an investment D. required rate of return or the hurdle rate
1. True or false. Rate of return is the interest earned on the unpaid balance of an amportized loan
8 In performing a Cash Flow Analysis, we can deduct: a. Mortgage Loan Interest b. Amortized Loan Points c. Cost Recovery d. All the above
CREATE AN EXAMPLE PROBLEM WITH CASHFLOW a.) nominal compound interest b.) continuous compound interest