Financial Accounting
3rd Edition
ISBN: 9780133791129
Author: Jane L. Reimers
Publisher: Pearson Higher Ed
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Textbook Question
Chapter 7A, Problem 4EB
Calculate payments using time value of money concepts. (LO 8). For each of the following, calculate the payment each loan would require. Assume the payments are made at the end of the period in each case. Interest rates are annual rates.
- 1. Principal = $25,000; interest rate = 6%; term = 5 years; payments = annual
- 2. Principal = $25,000; interest rate = 9%; term = 5 years; payments = annual
- 3. Principal = $35,000; interest rate = 7%; term = 8 years; payments = annual
- 4. Principal = $35,000; interest rate = 7%; term = 8 years; payments = semiannual
- 5. Principal = $40,000; interest rate = 12%; term = 2 years; payments = monthly
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1. Let's assume that a loan of $100,000 with an annual interest rate of 6% over 30 years pays monthly payments of $500.
a. Calculate the accumulation rate
b. Calculate the payment rate .
c. Answer : How will the balance of the principal be at the end of the loan in relation to the original amount of the loan? Less, equal or greater?
Provide calculations.
In the problem, find i (the rate per period) and n (the number of periods) for each loan at the given annual rate.
Monthly payments of $245.65 are made for 4 years to repay a loan at 7.2% compounded monthly.
Chapter 7A Solutions
Financial Accounting
Ch. 7A - Prob. 1YTCh. 7A - Suppose Action Company issues a 1,000, 10-year,...Ch. 7A - Suppose HPS Company issues a 1,000 face value,...Ch. 7A - Present value. (LO 8). Suppose you want to have...Ch. 7A - Present value. (LO 8). Able Company has offered to...Ch. 7A - Calculate payments using time value of money...Ch. 7A - Calculate payments using time value of money...Ch. 7A - Prob. 5PACh. 7A - Prob. 6PB
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Principles of Accounting Volume 2
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- Calculating interest and APR of installment loan. Assuming that interest is the only finance charge, how much interest would be paid on a 5,000 installment loan to be repaid in 36 monthly installments of 166.10? What is the APR on this loan?arrow_forwardUse 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?arrow_forwardIf 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?arrow_forward
- 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?arrow_forwardYou 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.arrow_forward
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