Question

You are considering buying a piece of land priced today at $120,000. The bank has offered you a loan to buy it. The loan is a 5-year loan for which you will make semi- annual payments (at the end of each semester). The APR for the loan is 10%. How much is the semi-annual payment? 1) $12,039.54 2) $15,540.55 O 3) $31,655.70 04) $9,540.55 Question 10 (3 points) You borrowed $10,000 two years ago. The loan terms are: 5-year loan with APR of 12% and with monthly payments of $222.44. Today, you decided you want to pay off the loan in 20 months rather than the remaining life of the loan. How much more do you have to add to your monthly payment in order to accomplish it? Write out your answer in the space provide. MAKE SURE TO SHOW HOW YOU OBTAIN THE ANSWER (STEPS NECESSARY). If you do not show your work, you will not get credit. Showing work is not showing the keys used in a financial calculator, doing that will get you 0 credit.

Answer 1

1)

Rate = 10% / 2 = 5%

Number of periods = 5 * 2 = 10

Present value = Semi annual payment * [1 - 1 / (1 + r)ⁿ] / r

120,000 = Semi annual payment * [1 - 1 / (1 + 0.05)¹⁰] / 0.05

120,000 = Semi annual payment * [1 - 0.613913] / 0.05

120,000 = Semi annual payment * 7.721735

Semi annual payment = $15,540.55