Question
In: Finance
A 5-year, 10%, $500,000 loan requires equal principal payments in years 4 and 5 ($250,000 each...
A 5-year, 10%, $500,000 loan requires equal principal payments in years 4 and 5 ($250,000 each year). Show the cash flows (interest and principal payments) for years 1-5.
Solutions
Expert Solution
| Years | Cash OutFlow | Interest | Loan Repayment | Cumulative Balance |
| 0 | $ 5,00,000 | $ - | $ 5,00,000 | |
| 1 | $ 50,000 | $ 5,50,000 | ||
| 2 | $ 55,000 | $ 6,05,000 | ||
| 3 | $ 60,500 | $ 6,65,500 | ||
| 4 | $ 66,550 | $ 4,82,050 | $ 2,50,000 | |
| 5 | $ 25,000 | $ 2,75,000 | $ - | |
| Total | $ 2,57,050 | $ 7,57,050 | ||
| total Interest Payment = | $ 2,57,050 | |||
| Prinicipal Amount = | $ 5,00,000 | |||
| Year 4 Payment = $ 250,000 + $ 50,000 + $ 55,000 + $ 60,500 + $ 66,550 + $ 25,000 =$ 482,050 | ||||
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