compare and contrast different loan terms, discount loans, interest-only loans, and amortized loans.

Expert Solution

Discount loans: A discount loan is a special type of the loan, where the borrower promise to pay a fixed sum of money at fixed time in exchange for borrowing today. In the discount loan process lender calculates the discounted value of loan amount with fixed interest rate for loan tenure. The lender will only pay the loan amount after deduction of interest. However, the borrower has to pay back the whole loan amount at end of loan term.

Interest-only loans: An interest-only loan is a special type loan, in the arrangement the borrower pays interest on loan payment to the lender with specify interest rate till the time of loan, but the principal loan amount will remain unchanged. Borrower will pay back the principle amount at the end.

Amortized loans: This is very common form of loan, the loan repayment will be equally distributed over time of loan. The loan principal balance will be amortized over the time. The borrower will pay back the loan in equal installment , the installment will be calculated as combination principle and Interest rate. Mortgages are typically amortized loan.

jeff jeffy answered 2 months ago

pure discount loans, interest-only loans, amortized loans, and balloon loans. What do each of those categories...

pure discount loans, interest-only loans, amortized loans, and balloon loans. What do each of those categories mean and please provide a real-life example of when each could be an appropriate method of financing.

Explain the differences between a pure discount loan, an interest-only loan, and a level-payment amortized loan....

Explain the differences between a pure discount loan, an interest-only loan, and a level-payment amortized loan. Explain interest rate risk. What are the three elements in every time value of money calculation?

Amortized loans : You are faced with a choice of mortgage terms to purchase a new...

Amortized loans : You are faced with a choice of mortgage terms to purchase a new home costing $300,000. You are able to put a $40,000 down payment on the home. The bank offers you a fixed-rate of 4.5% for a 30-year loan, and one at 4% for a 15-year loan. You have determined that you can afford up to, but not more than, a $1750 monthly mortgage payment. How do the payment amounts on the 2 loans compare? Can...

Explain why Car loans(Auto Loans), Mortgage, and Credit Card are so different in terms of interest...

Explain why Car loans(Auto Loans), Mortgage, and Credit Card are so different in terms of interest offering based on the formula components, such as Risk Free Rate, Inflation Premium, Default Risk Premium, Maturity Risk Premium and Liquidity Premium. You need to relate those components with the length/duration of lending period, and types of collateral, like housing for Mortgage, vehicle for Auto loans and none for credit card. Use your own thought, opinion and other information you found online.

complete an amortization schedule for the following loan. the loan is $100,000 at 3.5% interest, amortized...

complete an amortization schedule for the following loan. the loan is $100,000 at 3.5% interest, amortized on a YEARLY basis over five (5) years.

Compare and contrast different local and international sustainable reporting frameworks in terms of Australia.

Investigate the effect of the term on simple interest amortized auto loans by finding the monthly...

Investigate the effect of the term on simple interest amortized auto loans by finding the monthly payment and the total interest for a loan of $17,000 at 9 7 8 % interest if the term is the following. (Round your answers to the nearest cent.) (a) three years payment $ total interest $ (b) four years payment $ total interest $ (c) five years payment $ total interest $ Step by step

Date Cash interest Interest revenue Amortization of discount Discount balance Amortized Cost 7/1/2018 $ 33,367 $...

Date Cash interest Interest revenue Amortization of discount Discount balance Amortized Cost 7/1/2018 $ 33,367 $ 666,633 12/31/2018 $ 42,000 $ 46,664 $ 4,664 28,703 671,297 6/30/2019 $ 42,000 46,991 4,991 23,712 676,288 12/31/2019 $ 42,000 47,340 5,340 18,372 681,628 6/30/2020 $ 42,000 47,714 5,714 12,658 687,342 12/31/2020 $ 42,000 48,114 6,114 6,544 693,456 6/30/2021 $ 42,000 48,542 6,542 2 699,998 USING THE TABLE ABOVE PLEASE ENTER USING FORMULAS OR ENTER MANUALLY FOR THE FINANCIAL STATEMENT BELOW. PLEASE EXPLAIN HOW...

Loan of $20000 with interest at j2 = 10%, is to be amortized by equal payments...

Loan of $20000 with interest at j2 = 10%, is to be amortized by equal payments at the end of each 6 months over a period of 20 half-years. Using the Retrospective Method, Determine the outstanding balance at the end of 12 half-years. choose 25549.22 10374.36 10367.9

Loan of $10000 with interest at j4 = 12%, is to be amortized by equal payments...

Loan of $10000 with interest at j4 = 12%, is to be amortized by equal payments at the end of each quarter over a period of 30 quarters. Using the Retrospective Method, Determine the outstanding balance at the end of 12 quarters. 7017.04 14257.61 7016.84

Question