4a Amortization Schedule

Set up an amortization schedule for a $35,000 loan to be repaid in equal installments at the end of each of the next 5 years. The interest rate is 8%. Round your answers to the nearest cent. Enter "0" if required

Year	Payment	Repayment Interest	Repayment of Principal	Balance
1	$	$	$	$
2	$	$	$	$
3	$	$	$	$
4	$	$	$	$
5	$	$	$	$
Total	$	$	$

How large must each annual payment be if the loan is for $70,000? Assume that the interest rate remains at 8% and that the loan is paid off over 5 years. Round your answer to the nearest cent. $

How large must each payment be if the loan is for $70,000, the interest rate is 8%, and the loan is paid off in equal installments at the end of each of the next 10 years? This loan is for the same amount as the loan in part b, but the payments are spread out over twice as many periods. Round your answer to the nearest cent. $ Why are these payments not half as large as the payments on the loan in part b?

I. Because the payments are spread out over a longer time period, more principal must be paid on the loan, which raises the amount of each payment. II. Because the payments are spread out over a longer time period, less interest is paid on the loan, which raises the amount of each payment. III. Because the payments are spread out over a longer time period, less interest is paid on the loan, which lowers the amount of each payment. IV. Because the payments are spread out over a shorter time period, more interest is paid on the loan, which lowers the amount of each payment. V. Because the payments are spread out over a longer time period, more interest must be paid on the loan, which raises the amount of each payment.

4b Growth Rates

Sales for Hanebury Corporation's just-ended year were $6 million. Sales were $3 million 5 years earlier.

At what rate did sales grow? Round your answer to the nearest whole number. %

Suppose someone calculated the sales growth for Hanebury Corporation in part a as follows: "Sales doubled in 5 years. This represents a growth of 100% in 5 years; dividing 100% by 5, we find the growth rate to be 20% per year." Explain what is wrong with this calculation.

4c Repaying a Loan

While Mary Corens was a student at the University of Tennessee, she borrowed $12,000 in student loans at an annual interest rate of 8.20%. If Mary repays $1,500 per year, how long (rounded up to the nearest year) will it take her to repay the loan?

year(s)

4d Present Value of a Perpetuity

What is the present value of a perpetuity of $900 per year if the appropriate discount rate is 7.45%? Round your answer to the nearest cent. $

If interest rates in general were to double and the appropriate discount rate rose to 14.9%, what would its present value be? Round your answer to the nearest cent. $

4f Loan Amortization

Your company is planning to borrow $0.5 million on a 5-year, 11%, annual payment, fully amortized term loan. What fraction of the payment made at the end of the second year will represent repayment of principal? Round your answer to two decimal places.

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