Question

In: Finance

Akron Corporation has borrowed $1.2 million from a bank with the understanding that they will pay...

  1. Akron Corporation has borrowed $1.2 million from a bank with the understanding that they will pay $50000 a month until it pays off the loan. The bank will charge 9% annual interest, compounded monthly. Akron will make the payments at the end of each month. Find the following:
  1. How long will it take Akron to pay off the loan; (Answer: 26.56 months)
  2. What is the balance of the loan after 24 months? (Answer: $126272.71)

please answer in excel format

Solutions

Expert Solution

=> First, we will create a loan amortization schedule for it:

a)

=> In the above table we can see that, in 27th payment we only have to pay $ 28,007.39 (That is 27,798.90 principal amount and 9% interest on it)

* Therefore, the time required to pay off the loan = 26 + (28,007.39/50,000) = 26.56 months

b)

=> In the above table we can clearly see the balance after 24 months

* Therefore, the answer is $ 126,272.71

Formula used in excel:

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

A student borrowed $10000 from the bank. She must pay $400 at the end of every...
A student borrowed $10000 from the bank. She must pay $400 at the end of every month for 5 years. what is the effective annual interest rate on the loan?
Cooper corporation has borrowed $120,000 from the bank at 8% annual interest rate, compounded monthly. The...
Cooper corporation has borrowed $120,000 from the bank at 8% annual interest rate, compounded monthly. The company plans to pay $2000 per month for the first 12 months, and then pay $2500 per month for the next 12 months. Find the remaining balance of the loan after 24 months. (Answer: $82655.21) Please answer in excel format
Bank of Wakanda has deposits of $1.2 billion. It holds reserves of $120 million and government...
Bank of Wakanda has deposits of $1.2 billion. It holds reserves of $120 million and government bonds worth $400 million. If the bank sells its loans at market value of $870 million, what is the bank’s net worth?
Q2. (a) Abu just borrowed RM30,000 to pay for a second hand car from UTAR Bank....
Q2. (a) Abu just borrowed RM30,000 to pay for a second hand car from UTAR Bank. He took out a 60-month loan at an interest rate of 10.472% per annum and his installment payments are RM761.80 per month. The UTAR Bank’s loan officer showed the following calculations to Abu on how the monthly installment payments are derived: Total interest to be paid = 10.472% x RM30,000 x 5 years = RM15,708 Total interest and principal to be paid = RM15,708...
I Interest Rate Settings and Calculations A company borrowed $300 million from a bank for two...
I Interest Rate Settings and Calculations A company borrowed $300 million from a bank for two years at 3-month LIBOR+1.5%, beginning July 9 (this week). There is no amortization. Fill in the table below. In the first column you need to write the day of the month, being careful of possible non-banking days. The second column gives you the LIBOR scenarios for that day. Then write the interest rate and the interest payment for those dates. date 3-mo LIBOR interest...
SBS Corporation borrowed $70,000 from the bank on July 1, 2017. The note had a 6...
SBS Corporation borrowed $70,000 from the bank on July 1, 2017. The note had a 6 percent annual rate of interest and matured on April 30, 2018. Interest and principal were paid in cash on the maturity date. Required: A.        What amount of interest expense was recognized on the 2017 income statement? Interest Expense $ B.        What amount of cash did SBS pay for interest in 2017? Amount of Cash Paid $ C.        What amount of total liabilities was reported...
Sandra has just borrowed $40,000 to purchase a new van from ANZ Bank. ANZ Bank is...
Sandra has just borrowed $40,000 to purchase a new van from ANZ Bank. ANZ Bank is charging 11.50% p.a. compounded weekly on automobile loans. How much must Sandra repay each week for a loan over 4 years?
QUESTION 3 In January 2017, Moverna Bhd. (Moverna) borrowed RM2 million from IM Bank and created...
QUESTION 3 In January 2017, Moverna Bhd. (Moverna) borrowed RM2 million from IM Bank and created a floating charge over all its assets and undertakings in favour of the latter as a security for the loan. The instrument creating the floating charge expressly stated that Moverna was not allowed to create any other charges upon its assets in priority to or in pari passu with the floating charge. The floating was duly registered. A year later, Moverna critically needed more...
QUESTION 3 In January 2017, Moverna Bhd. (Moverna) borrowed RM2 million from IM Bank and created...
QUESTION 3 In January 2017, Moverna Bhd. (Moverna) borrowed RM2 million from IM Bank and created a floating charge over all its assets and undertakings in favour of the latter as a security for the loan. The instrument creating the floating charge expressly stated that Moverna was not allowed to create any other charges upon its assets in priority to or in pari passu with the floating charge. The floating was duly registered. A year later, Moverna critically needed more...
During 2015, The Mann Corporation borrowed $500,000 from The Biltmore National Bank. The loan agreement included...
During 2015, The Mann Corporation borrowed $500,000 from The Biltmore National Bank. The loan agreement included a debt covenant restricting the company’s level of debt relative to shareholders’ equity. The covenant specified that Mann’s long-term debt to shareholders’ equity ratio could not exceed 1-to-1 at any time during the loan period. The Mann Corporation’s 2015 year-end balance sheet appeared as follows: 2015 Total assets $ 2,001,600 Current liabilities $   542,100 Long-term debt 625,500 Shareholders' equity 834,000 $ 2,001,600 Calculate The...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT