Suppose your new Model X costs $100 k. If you finance it at 10% for five years,

Firstly, a pure discount loan will ask a lump-sum payment at the end:

Year 0 1 2 3 4 5
+----------+----------+----------+----------+----------+
Cash Flow $100 k -FV

Secondly, an amortized loan will ask an equally-splitted payment every period:

Year 0 1 2 3 4 5
+----------+----------+----------+----------+----------+
Cash Flow $100 k -PMT -PMT -PMT -PMT -PMT

Thirdly, a coupon bond will pay interest periodically and principal at the end:

Year 0 1 2 3 4 5
+----------+----------+----------+----------+----------+
Cash Flow $100 k -C -C -C -C -C-$100 k

What is the payment of the amortized loan above?

Answer rating: 100% (QA)

To calculate the payment of the amortized loan we can use the formula for the prese... View the full answer