Jack would like to buy a piece of machinery by borrowing $50,000 from a bank for 4 years at an interest rate of 7% per year. For the first 2 years, Jack expects to pay $3200 at the end of each...
| Jack would like to buy a piece of machinery by borrowing $50,000 from a bank for 4 years at an | |||||||||
| interest rate of 7% per year. For the first 2 years, Jack expects to pay $3200 at the end of each | |||||||||
| quarter as payment toward the loan. Jack then expects to increase the equal quarterly payments for the | |||||||||
| remainder of the loan term. After the 2 years, what equal quarterly payments will Jack make for the | |||||||||
| remainder of the the term. | |||||||||
| Quarterly payment for the remaining 2 years: $_______________ | |||||||||
Homework Answers
Money Jack borrowed = $50,000
Interest Rate ( Simple Interest ) = 7 % per annum
Total Interest to be paid = $ 50,000 x 0.07 x 4 = $ 14000
Total Amount to be payed back by the end of 4 years = $ 50,000 + $ 14,000 = $ 64,000
Amount payed back in first 2 years =
$ 3200 / quarter *4 quarters/year * 2 years = $ 25600
Amount to be payed back in next two years = $ 64000 - $ 25600 = $ 38400
$ 38400 = $ x /quarter *4 quarters/year * 2 years
x = 38400 / 8 = $ 4800 /quarter. Answer.
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