Determine the annual payment on a $15,000 loan that is to be amortized over a four-year period
Question:
Determine the annual payment on a $15,000 loan that is to be amortized over a four-year period and carries a 10 percent interest rate. Also make a loan amortization schedule for this loan.
15 Assume a bank loan requires an interest payment of $85 per year and a principal payment of $1,000 at the end of the loan's eight-year life.
a. At what amount could this loan be sold for to another bank if loans of similar quality carried an 8.5 percent interest rate? That is, what would be the present value of this loan?
b. Now, if interest rates on other similar-quality loans are 10 percent, what would be the present value of this loan?
c. What would be the present value of the loan if the interest rate is 8 percent on similar-quality loans?
Introduction to Finance Markets Investments and Financial Management
ISBN: 978-1118492673
15th edition
Authors: Melicher Ronald, Norton Edgar