Question

6.a Annual interest. Tommy is borrowing $12,000 on a 10-year, 18% annual interest loan. How much interest will Tommy have paid over the entire course of the loan when it is finally repaid assuming interest is compounded annually, and payments are paid annually? Work: 6.b Monthly interest. Assuming Tommy made the same borrowing, but the interest was calculated monthly and payments were made monthly, how much interest will Tommy have paid over the entire course of the loan? Work:

Answer 1

=PMT(C2,C3,-C4,-C5,C6) C7 foc А 1 Annually 2 RATE Rate Per Period 3 NPER Total No.of Payments 4 PV Present Value 5 FV Future value 6 TYPE Ending(0), Beginning(1) 7 PMT Payment per period 8 (PMT(rate,nper,pv,-fv, type)) Total Interest 2670.18*10-12000 14,701.76 12000 $2,670.18 PMT(0.18,10,-12000,0,0) 0.015 0.18/12 120 10*12 12000 Total Interest 216.22*120-12000 13,946.67 10 Monthly 11 RATE 12 NPER 13 PV 14 FV 15 TYPE 16 PMT 17 18 Rate Per Period Total No.of Payments Present Value Future value Ending(0), Beginning(1) Payment per period (PMT(rate,nper,pv,-fv, type)) $216.22 PMT(0.015,120,-12000,0,0)

e fi =PMT(C2,C3,-€4,-C5,C6) B Total Interest 2670.18*10-12000 =C3*07-04 1 Annually 2 RATE 3 NPER 4. PV 5 FV 6 TYPE 7 PMT 8 Rate Per Period lo 18 Total No.of Payments T10 Present Value [12000 Future value Ending(0), Beginning(1) TO Payment per period ||=PMT(C2,C3,-C4, C5,C6) (PMT(rate,nper,pv,-fv, type)) PMT(0.18,10,-12000,0,0) 9 =0.18/12 120 12000 0.18/12 10*12 Total Interest 216.22*120-12000 =C12*C16-C13 10 Monthly 11 RATE 12 NPER 13 PV 14 FV 15 TYPE 16 PMT 17 18 Rate Per Period Total No.of Payments Present Value Future value Ending(0), Beginning(1) Payment per period (PMT(rate,nper,pv,-fv, type)) =PMT(C11,C12,-C13,-C14,015) PMT(0.015,120,-12000,0,0)