Question

In: Finance

Smith borrows $5,000 on August 1, 2017 at a nominal annual rate of interest of 12%...

Smith borrows $5,000 on August 1, 2017 at a nominal annual rate of interest of 12% compounded monthly. Smith agrees to make payments of $800 per month with a first payment on September 1, 2017 and a final payment of less than $800. What is the amount of the final payment?

Solutions

Expert Solution

nominal annual rate of interest = 12%

monthly rate of interest = annual rate / 12 = 12% / 12 = 1%

Interest in any month = principal outstanding at beginning of month * 1%

Principal portion of monthly payment = monthly payment minus interest portion of payment

principal outstanding at end of month = principal outstanding at beginning of month minus principal portion of monthly payment

Final payment = $389.85

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

Smith borrows $5,000 on August 1, 2017 at a nominal annual rate of interest of 12%...
Smith borrows $5,000 on August 1, 2017 at a nominal annual rate of interest of 12% compounded monthly. Smith agrees to make payments of $800 per month with a first payment on September 1, 2017 and a final payment of less than $800. In which of the following ranges is the amount of the final payment? A 363.20 B 385.50 C 389.90 D 392.60 E 1185.50
On January 1, 2017, Smith deposits 1,000 into an account earning nominal annual interest rate of...
On January 1, 2017, Smith deposits 1,000 into an account earning nominal annual interest rate of i(4) = 0.04 compounded quarterly with inter- est credited on the last day of March, June, September, and December. If Smith closes the account during the year, simple interest of 4% is paid on the balance from the most recent interest credit date. (a) What is Smith’s close-out balance on September 23, 2017? (b) Suppose all four quarters in the year are considered equal,...
A loan of 11000 is made with interest at a nominal annual rate of 12% compounded...
A loan of 11000 is made with interest at a nominal annual rate of 12% compounded monthly. The loan is to be repaid by 36 monthly payments of 367.21 over 37 months, starting one month after the loan is made, there being a payment at the end of every month but one. At the end of which month is the missing payment? For your reference, the answer is at the 17th month.
The U.S. nominal annual rate of interest is 3% and the European annual nominal rate of...
The U.S. nominal annual rate of interest is 3% and the European annual nominal rate of interest on the Euro is 2%. At the same time, the spot exchange rate is $1.20 per Euro and the real interest rate is 2% in both the U.S. and Europe. What is the one year forecast of the U.S. dollar (USD) per Euro spot exchange rate, assuming the international Fisher effect holds? Show work. What is the U.S. dollar (USD) per Euro one-year...
If the real interest rate is 7 percent when the nominal interest is 12 rate is...
If the real interest rate is 7 percent when the nominal interest is 12 rate is percent, the inflation rate is Group of answer choices 5 percent. 1.7 percent. -5 percent. 7 percent. 19 percent.
Suppose you put $100 in the bank on January 1, 2017. If the annual nominal interest...
Suppose you put $100 in the bank on January 1, 2017. If the annual nominal interest rate is 5 percent and the inflation rate is 5 percent, you will be able to buy ________ worth of inflation-adjusted goods on January 1, 2018. a. $110 b. $95 c. $100 d. $105 e. $90 Practically, in the long run the real interest rate is equal to: a. a savings account. b. the marginal product of capital. c. the rate of return to...
3. Interest rate parity: The annual, riskless, nominal interest rate in the Eurozone is [– 0.5%]....
3. Interest rate parity: The annual, riskless, nominal interest rate in the Eurozone is [– 0.5%]. The spot rate between the euro (EUR) and the dollar (USD) is USD 1.1074 / EUR and the 90-day forward rate between the euro and the dollar is USD 1.0930 / EUR. a) What is the annual, riskless, nominal interest rate in the US if interest rate parity holds? b) What happens if interest rate parity is violated? Explain. (7 points) a) Calculate annual,...
Andy borrows funds of $ 1000 with an interest rate of 12% per year with an...
Andy borrows funds of $ 1000 with an interest rate of 12% per year with an repayment period of 8 years and is repaid using the amortization method. a) After paying installments at the end of year 4, A intends to pay them off. How much money must be paid for the repayment? b) If after paying installments at the end of year 4, Andy requests that he be given an additional payment period of 6 years. i.e. the borrowing...
The nominal exchange rate is the nominal interest rate in one country divided by the nominal interest...
The nominal exchange rate is the nominal interest rate in one country divided by the nominal interest rate in the other country. the ratio of a foreign country's interest rate to the domestic interest rate. rate at which a person can trade the currency of one country for another. the real exchange rate minus the inflation rate.
Andrew borrows $2,500,000 to purchase a warehouse.  The annual interest rate on the loan is 7.25%, and...
Andrew borrows $2,500,000 to purchase a warehouse.  The annual interest rate on the loan is 7.25%, and the term of the loan is 15 years.  Answer the following questions about this loan: What is the monthly payment necessary to amortize this loan? What is the balance on the loan at the end of month 36? How much interest will Andrew pay in month 37? How much principal will Andrew pay in month 37? How much principal will Andrew pay in the fourth...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT