Question
In: Finance
If a loan was repaid by semi-annual payments of $4710.00 in 6.5 years at 8.34% compounded...
If a loan was repaid by semi-annual payments of $4710.00 in 6.5 years at 8.34% compounded quarterly, how much interest was paid?
Solutions
Expert Solution
Interest paid was $ 14,814.51
| Step-1:Calculation of equivalent semi annual interest rate | ||||||
| Equivalent semi annual interest rate | = | ((1+i)^n)-1 | ||||
| = | ((1+0.02085)^2)-1 | |||||
| = | 4.21% | |||||
| Where, | ||||||
| i | = | Quarterly interest rate | = | 8.34%/4 | = | 0.02085 |
| n | = | Number of Quarters in a semi annual period | = | 2 | ||
| Step-2:Calculation of loan amount | ||||||
| Present Value of semi annual payment | =pv(rate,nper,pmt,fv) | |||||
| $ 46,415.49 | ||||||
| Where, | ||||||
| rate | = | Semi annual rate | = | 4.21% | ||
| nper | = | Number of period | = | 6.5*2 | = | 13 |
| pmt | = | Semi annual payment | = | $ -4,710.00 | ||
| fv | = | Future value of cash flow | = | 0 | ||
| Step-3:Calculation of interest paid | ||||||
| Interest Paid | = | Total repayment | - | Loan amount | ||
| = | $ 61,230.00 | - | $ 46,415.49 | |||
| = | $ 14,814.51 | |||||
| Working: | ||||||
| Total repayment | = | Semi annual payment | * | Number of semi annual payment | ||
| = | $ 4,710.00 | * | 13 | |||
| = | $ 61,230.00 |
jeff jeffy answered 1 year agoRelated Solutions
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