Question

In: Economics

Assume that Stan takes a student loan of $5,000 at the beginningof his first year...

Assume that Stan takes a student loan of $5,000 at the beginning of his first year at Miskatonic University and graduates at the end of year 5. After graduation, a 7% interest rate on the debt is applied. If Stan makes four equal annual payments to re-pay the debt in four years after graduation, what is the IRR on his loan?

Solutions

Expert Solution

In the given situation the student has taken a loan of $5,000 and started the repayment after completion of his graduation and the interest rate is also calculated after completion of the graduation. So, the annual repayment and the interest is calculated from year 6 to year 9.

The given data are executed in excel.

IRR on his loan = 2.24%

The excel calculation are given below:


Related Solutions

Assume a farmer takes out a five year loan for $50,000.
Assume a farmer takes out a five year loan for $50,000. The annual interest rate is 4% and the farmer will make equal annual principal payments for years one through five. Approximately how much interest will be paid over the life of the loan? Round all numbers to the nearest whole dollar.A. 6160B. 56000C. 56160D.6000
Paul takes out a 15-year loan of 250,000 from his bank. The bank charges interest at...
Paul takes out a 15-year loan of 250,000 from his bank. The bank charges interest at 4% p.a. compounded half-yearly. During the first 10 years, Paul repays $11,000 at the end of each 6 months. After that period, Paul will repay $X at the end of each year for the remaining 5 years. Which of the following can be used to calculate $X.
A student takes out a loan of ​$1,900 at the beginning of each semester​ (semi-annually) for...
A student takes out a loan of ​$1,900 at the beginning of each semester​ (semi-annually) for 13 semesters to pay for college. The loan charges 7.6​% interest compounded semiannually. The student graduates after the 13 semesters and refinances the loan to a lower 6.9​% rate compounded monthly with monthly payments ​(made at the end of each​ month) for 120 months. Find the monthly payment and the total interest paid. The monthly payment is ​$_____. ​(Round to the nearest cent as​...
Rino just purchased his first car with a 7.5% 5 year mortgage loan of RM78,000. (a)...
Rino just purchased his first car with a 7.5% 5 year mortgage loan of RM78,000. (a) If he pays interest yearly and the total loan will be settled at the end of year 5, how much is his equal yearly payment for the sinking fund which earns 5.2% interest yearly compounding? Assume that the first payment to the fund make immediately. (b) Refer to part (a), if Rino did not pay interest to the lender for the whole tenure till...
EXERCISE 13.4 An 18-year-old student donated for the first time at a blood drive at his...
EXERCISE 13.4 An 18-year-old student donated for the first time at a blood drive at his high school. Concerned that he may have contracted HIV before the donation, what instructions should he follow to prevent his unit from being transfused? Why are questions regarding HIV important even when tests are performed to detect the virus? EXERCISE 14.5 Previous testing on a donor’s computer record indicates CMV antibody–negative. The most recent donation demonstrates that antibodies are currently present. 1. Can the...
1.A student takes out a college loan of $5000 at an annual percentage rate of 3%,...
1.A student takes out a college loan of $5000 at an annual percentage rate of 3%, compounded monthly. a. If the student makes payments of $1000 per month, how much, to the nearest dollar, does the student owe after 4 months? Don't round until the end. b. After how many months will the loan be paid off? 2. Suppose you start with one liter of vinegar and repeatedly remove 0.08 L, replace with water, mix, and repeat. a. Find a...
Last year, Jimmy graduated  from First City  University and received USD 5,000 from his father as a graduation...
Last year, Jimmy graduated  from First City  University and received USD 5,000 from his father as a graduation gift. Jimmy, , recently heard from a friend who earns a profit from investing in the bond market during this pandemic time. JImmy does not know much about investing or how people actually “make money by investing”. He asked you to help him in making a wise investment plan. Required: Before investing any money, explain to Jimmy about the risk involved. Calculate the expected...
A borrower borrows on a five year loan $5,000 from a bank at 10% and will...
A borrower borrows on a five year loan $5,000 from a bank at 10% and will pay back the loan in ten equal $ payments (semi-annually) at the end of each time period. How much is each equal payment, how much principal and interest is paid back, and how much interest is paid back?
Assume that one of your cousins takes a loan of $12,000 from a bank at 18...
Assume that one of your cousins takes a loan of $12,000 from a bank at 18 per cent interest rate. If your cousin plans to repay $1,200 per quarter against this loan amount, in how many years she would be able to repay the loan (and accumulated interest) fully?
Nikita takes out a 10-year loan. The loan is repaid by making 10 annual repayments at...
Nikita takes out a 10-year loan. The loan is repaid by making 10 annual repayments at the end of each year. The first loan repayment is equal to X, with each subsequent repayment 10.16% greater than the previous year’s repayment. The annual effective interest rate being charged on the loan is 8%. The amount of interest repaid during the first year is equal to 892.20. Calculate X. a.1100 b.1150 c.1200 d.1250 e.1300
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT