Mr. Smart borrowed $25,000 from a bank on annuity for 2 years at 10% annual interest...

Mr. Smart borrowed $25,000 from a bank on annuity for 2 years at 10% annual interest compounded and payable semiannually (every six months). Calculate the semiannual payments and provide a table that shows periodic payment, balance, interest payment, payment to principal for each payment as well as total amount which Mr. Smart will pay to the bank for the borrowed amount including interest and principal payments in the entire period of two years.

Solutions

Expert Solution

As per the information given above,

Rate of interest (r) = 10%
No. of years (n) = 2
Semi-annual frequency = 2
Loan amount = $25000

The required PMT is computed as under:

PMT = 7050.19

Thus, the PMT is $7050.19

The amortization schedule is as under:

Thus, the total amount to be paid is $28201 including principal and interest.

Workings:

Rahul Sunny answered 1 year ago

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