A company is discussing a $0.5 million loan with a bank. The interest rate is 12%...
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A company is discussing a $0.5 million loan with a bank. The interest rate is 12% compounded annually and the repayment period is 5 years. The bank is offering two options for loan repayment: Option A: Payments are to be received in equal installments at the end of each year. Option B: Interest is to be received on a yearly basis and the Principal is to be received at the end. All loan repayment items are end-of-year payments. Which options is better for the company? For Option A, construct a spreadsheet that shows for each period the following: annual payment, interest received, recovered capital, and unrecovered capital. For Option B, construct a spreadsheet that shows for periods 1 to 4, interest payments, and for the 5th (last) period, interest as well as the principal. A company is discussing a $0.5 million loan with a bank. The interest rate is 12% compounded annually and the repayment period is 5 years. The bank is offering two options for loan repayment: Option A: Payments are to be received in equal installments at the end of each year. Option B: Interest is to be received on a yearly basis and the Principal is to be received at the end. All loan repayment items are end-of-year payments. Which options is better for the company? For Option A, construct a spreadsheet that shows for each period the following: annual payment, interest received, recovered capital, and unrecovered capital. For Option B, construct a spreadsheet that shows for periods 1 to 4, interest payments, and for the 5th (last) period, interest as well as the principal.
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Answer Option A First of all lets calculate Installment amount Installment am... View the full answer
Related Book For
Finite Mathematics and Its Applications
ISBN: 978-0134768632
12th edition
Authors: Larry J. Goldstein, David I. Schneider, Martha J. Siegel, Steven Hair
Posted Date:
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