Homework Answers
| a. | Monthly payment | $ 373.28 | |||||||||
| Working: | |||||||||||
| Present value of annuity of 1 | = | (1-(1+i)^-n)/i | Where, | ||||||||
| = | (1-(1+0.0075)^-48)/0.0075 | i | 9%/12 | = | 0.0075 | ||||||
| = | 40.1847819 | n | 4*12 | = | 48 | ||||||
| Monthly payment | = | Loan amount / Present value of annuity of 1 | |||||||||
| = | $ 15,000 | / | 40.18478 | ||||||||
| = | $ 373.28 | ||||||||||
| b. | 22 months | ||||||||||
| Working: | |||||||||||
| Number of period | = | =nper(rate,pmt,pv) | Where, | ||||||||
| = | 21.75 | rate | 0.0075 | ||||||||
| pmt | $ 750 | ||||||||||
| pv | $ -15,000 | ||||||||||
| c. | Final payment: | ||||||||||
| Towards loan | $ 744.42 | ||||||||||
| Towards interest | $ 5.58 | ||||||||||
| Total | $ 750.00 | ||||||||||
| Working: | |||||||||||
| Value of loan is always present value of future payment. | |||||||||||
| Value of loan at the end of 47th month | = | 750 | * | (1+0.0075)^-1 | = | $ 744.42 | |||||
| Value towards interest | = | 750 | - | $ 744.42 | = | $ 5.58 | |||||
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