You borrow $10,000 at 14 percent compound annual interest for four years. The loan is repayable in four equal annual installments payable at the end of each year. What is the annual payment that will completely amortize the loan over four years? (You may wish to round to the nearest dollar.) Of each equal payment, what is the amount of interest? The amount of loan principal? (Hint: In early years, the payment is composed largely of interest, whereas at the end it is mainly principal.)
You borrow $10,000 at 14 percent compound annual interest for four years. The loan is repayable in four equal annual installments payable at the end of each year. What is the annual payment that will completely amortize the loan over four years? (You may wish to round to the nearest dollar.) Of each equal payment, what is the amount of interest? The amount of loan principal? (Hint: In early years, the payment is composed largely of interest, whereas at the end it is mainly principal.)
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 10P
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You borrow $10,000 at 14 percent compound annual interest for four years. The loan is repayable in four equal annual installments payable at the end of each year.
What is the annual payment that will completely amortize the loan over four years? (You may wish to round to the nearest dollar.)
Of each equal payment, what is the amount of interest? The amount of loan principal?
(Hint: In early years, the payment is composed largely of interest, whereas at the end it is mainly principal.)
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