Question

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a)Prepare an amortization schedule for a 10-year loan of $300,000. The interest rate is 12% and...

a)Prepare an amortization schedule for a 10-year loan of $300,000. The interest rate is 12% and the loan calls for equal payments. How much interest is paid in the fifth year? How much interest is paid over the life of the loan?

b)What is the present value of $2,625 per year at a discount rate of 8%, if the first payment is received six years from now and the last payment is received 20 years from now?

Expert Solution

a)Prepare an amortization schedule for a 10-year loan of $300,000. The interest rate is 12% and the loan calls for equal payments. How much interest is paid in the fifth year? How much interest is paid over the life of the loan?

Please see the attachment for amortization table

Screenshot with formulas

Interest paid in the fifth year = $26,196

Interest paid over the life of the loan = $230,952

b)What is the present value of $2,625 per year at a discount rate of 8%, if the first payment is received six years from now and the last payment is received 20 years from now?

First, let's find PV5

n = (20 - 6 + 1) = 15 payments

PV0 = 22,468.6315546875/(1 + 0.08)^5

PV0 = $15,291.7730964627

jeff jeffy answered 1 year ago

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