Question

In: Finance

1. The payment made each period on an amortized loan is constant, and it consists of...

1. The payment made each period on an amortized loan is constant, and it consists of some interest and some principal. Which of the following statement is correct?

2. If a bank compounds savings accounts annually, the effective annual rate is greater than the nominal rate. True False

3. The present value of a future cash flow will be greater if we increase the discounted interest rate and compound more frequently. True False

4. A bank loan has annual percentage rate APR = 6%, compounding monthly. What are the nominal annual rate, the periodic rate, and the effective annual rate of the loan, respectively?

Please show work using excel

Expert Solution

1)

Payment made each period on an amortized loan is called EMI or Equated monthly instalments and each EMI consists of Principal and Interest repayment,

2)

If compounding period is annual, then effective annual rate is equal to nominal rate. Whenever, the compounding periods are more than one period, then EAR > Nominal rate

Answer is False

3)

If discounted rate is increased, then present value of cash flow decreases due to a higher discounting effect.

Answer is True

4)

Formulae

jeff jeffy answered 2 years ago

The debt is amortized by equal payments made at the end of each payment interval. Compute...

The debt is amortized by equal payments made at the end of each payment interval. Compute (a) the size of the periodic payments; (b) the outstanding principal at the time indicated; (c) the interest paid by the payment following the time indicated for finding the outstanding principal; and (d) the principal repaid by the same payment as in part c. Debt Principal Repayment Period Payment Interval Interest Rate Conversion Period Outstanding Principal After: $16,000.00 8 years 6 months 3 %...

a. If the loan was amortized over 3 years, how large would each annual payment be?

You want to buy a house that costs $140,000. You have $14,000 for a down payment, but your credit is such that mort- gage companies will not lend you the required $126,000. However, the realtor persuades the seller to take a $126,000 mortgage (called a seller take-back mortgage) at a rate of 5%, provided the loan is paid off in full in 3 years. You expect to inherit $140,000 in 3 years, but right now all you have is $14,000,...

With a conventional amortized mortgage loan, what is TRUE about each monthly principal and interest payment?...

With a conventional amortized mortgage loan, what is TRUE about each monthly principal and interest payment? a. The loan payment will go up each month. b. The portion used to pay interest increases. c. The portion used to pay interest decreases. d. The loan payment will go down each month.

Explain the differences between a pure discount loan, an interest-only loan, and a level-payment amortized loan....

Explain the differences between a pure discount loan, an interest-only loan, and a level-payment amortized loan. Explain interest rate risk. What are the three elements in every time value of money calculation?

Determine the annual payment on a $19,500 loan that is to be amortized over a four-year...

Determine the annual payment on a $19,500 loan that is to be amortized over a four-year period and carries a 10 percent interest rate. Also prepare a loan amortization schedule for this loan.

Determine the annual payment on a $17,000 loan that is to be amortized over a four-year...

Determine the annual payment on a $17,000 loan that is to be amortized over a four-year period and carries a 10 percent interest rate. Also prepare a loan amortization schedule for this loan.

An $8000 loan is to be amortized with equal monthly payments over a 2 year period...

An $8000 loan is to be amortized with equal monthly payments over a 2 year period at j (12) = 8 %. Find the outstanding principal after 7 months and split the 8 th payment into principal and interest portions. outstanding principal after 7 months is? the principal in the 8 th payment is? the interest in the 8 th payment is?

1. a) Ali obtained a Kshs. 500,000 loan payable over 8 year period amortized at 12%...

1. a) Ali obtained a Kshs. 500,000 loan payable over 8 year period amortized at 12% interest with annual payments. Prepare a loan amortization schedule showing the loan balances at the end of the year under constant payment Amortization. b) A mortgage creates a right of security interest in the real property for the lender. What are the requirements from the lenders for valid mortgage contracts?

A 10-year amortized loan of $100,000 with 5% APR requires yearly loan payment. After making four...

A 10-year amortized loan of $100,000 with 5% APR requires yearly loan payment. After making four yearly payments, the fourth year's ending loan balance is $Answer (don't include thousand separator( , ), rounding the number with two decimal places)

Equal end-of-period semiannual payments of $500, increasing by $100 with each subsequent payment, are made to...

Equal end-of-period semiannual payments of $500, increasing by $100 with each subsequent payment, are made to a fund paying 10 percent compounded continuously. What will the fund amount to after 7 years? What is the present worth equivalent of the total set of payments? What is the equal semiannual equivalent amount of the payments?