Cooley Landscaping Company borrows $300,000 for a new front-end dirt loader. The bank is willing to...

Cooley Landscaping Company borrows $300,000 for a new front-end dirt loader. The bank is willing to loan the funds at 8.5% APR with QUARTERLY payment at the end of each quarter for the next 10 years. What is the QUARTERLY payment and how much of the first payment is used to pay for the interest?

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Expert Solution

Information provided:

Loan= Present value= $300,000

Time= 10 years*4= 40 quarters

Quarterly interest rate= 8.5%/4= 2.1250%

1.The quarterly payment is calculated by entering the below in a financial calculator:

PV= -300,000

N= 40

I/Y= 2.1250

Press the CPT key and PMT to compute the quarterly payment.

The value obtained is 11,208.56.

Therefore, the quarterly payment is $11,208.56.

2.Amount of interest in the first payment:

= $11,208.56 * 2.1250%

= $238.18.

jeff jeffy answered 1 year ago

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