Falco Inc. financed the purchase of a machine with a loan at 3.11% compounded monthly. This...

Falco Inc. financed the purchase of a machine with a loan at 3.11% compounded monthly. This loan will be settled by making payments of $9,100 at the end of every month for 7 years.

a. What was the principal balance of the loan? Round to the nearest cent

b. What was the total amount of interest charged? $0.00 Round to the nearest cent

Solutions

Expert Solution

a)Loan Amount

Present Value Of An Annuity

= C*[1-(1+i)^-n]/i]

Where,

C= Cash Flow per period

i = interest rate per period

n=number of period

= $9100[ 1-(1+0.002591667)^-84 /0.002591667]

= $9100[ 1-(1.002591667)^-84 /0.002591667]

= $9100[ (0.1954) ] /0.002591667

= $6,86,122.66

Total Amount Paid = $9100127

=$764400

Interest Amount =$764400-686123.66

=78277.34

jeff jeffy answered 2 years ago

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