Question

In: Economics

Mr. Bronson wants to be one of the investors in the new Sergio Leone movie called...

Mr. Bronson wants to be one of the investors in the new Sergio Leone movie called The Good, The Bad and The Ugly. He needs to borrow $1580000 from a bank at an interest rate of 6.9% compounded quarterly to invest in this movie. The loan will be repaid in 27 equal monthly payments. His first payment will be made one month after the day he borrows the money (i.e. at the end of month one.

  1. What is the amount of his monthly payments?
  2. What are the interest and principal payments in his 7th monthly payment.

Solutions

Expert Solution

Solution :-

Interest rate per quarter = 6.9% / 4 = 1.725%

Interest Rate Per Month = ( 1 + 0.069 / 4 )1/3 - 1 =

= 1.005717 - 1  

= 0.005717

= 0.5717%

Total Monthly Installments = 27

Amount Financed = $1,580,000

Now Value of Each Monthly installments = $1,580,000 / PVAF ( 0.5717% , 27 )

= $1,580,000 / 24.9534

= $63,318.09

Therefore the amount of his monthly installment = $63,318.09

(b)

The Interest Payment = $7,143.95

Principal Payment = $56,174.14

If there is any doubt please ask in comments

Thank you please rate

Rahul Sunny answered 8 months ago
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