ABC Ltd has an outstanding loan of $500,000 at a fixed interest rate of 8% per annum,
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Question:
ABC Ltd has an outstanding loan of $500,000 at a fixed interest rate of 8% per annum, compounded semi-annually, with a term of 10 years. ABC Ltd wants to prepay the entire loan amount after 5 years. However, the bank has a prepayment penalty of 2% of the outstanding balance. Calculate the following:
a) The outstanding balance on the loan after 5 years.
b) The prepayment penalty.
c) The total amount that ABC Ltd needs to pay to settle the loan.
Related Book For
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen
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