Homework Answers
Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate
40,000=Annuity[1-(1.06)^-20]/0.06
40,000=Annuity*11.4699212
Annuity=40,000/11.4699212
=$3487.38(Approx).
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Fully amortized loan (annual payments for principal and interest with the same amount each year). Chuck...
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Fully amortized loan (annual payments for principal and interest with the same amount each year). Chuck Ponzi has talked an elderly woman into loaning him $45,000 for a new business venture. She has, however, successfully passed a finance class and requires Chuck to sign a binding contract on repayment of the $45,000 with an annual interest rate of 7% over the next 20 years. Determine the cash flow to the woman under a fully amortized loan, in which Ponzi will...
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Discount loan (interest and principal at maturity). Chuck Ponzi has talked an elderly woman into loaning him $50,000 for a new business venture. She has, however, successfully passed a finance class and requires Chuck to sign a binding contract on repayment of the $50,000 with an annual interest rate of 8% over the next 20 years. Determine the cash flow to the woman under a discount loan, in which Ponzi will have a lump-sum payment at the end of the...
Discount loan (interest and principal at maturity). Chuck Ponzi has talked an elderly woman into loaning him $30,000 for a new business venture. She has, however, successfully passed a finance class and requires Chuck to sign a binding contract on repayment of the $30,000 with an annual interest rate of 1 1% over the next 20 years. Determine the cash flow to the woman under a discount loan, in which Ponzi will have a lump-sum payment at the end of...
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