Question
In: Finance
A debt of $38000 is repaid over 15 years with payments occurring semi-annually. Interest is 6...
A debt of $38000 is repaid over 15 years with payments occurring semi-annually. Interest is 6 % compounded monthly.monthly.
(a) What is the size of the periodic payment?
(b) What is the outstanding principal after payment 24?
(c) What is the interest paid on payment 25?
(d) How much principal is repaid in payment 25?
Solutions
Expert Solution
Solution :-
Interest rate with monthly compounding = 6%
Therefore monthly interest rate = 6% / 12 = 0.05% per month
Semiannual interest rate = ( 1+0.05)6 - 1 = 1.030378 - 1 = 0.030378 = 3.0378%
Total Payments = 15 * 2 = 30
Now Value of each installment = $38,000 / PVAF( 3.038% , 30 )
= $38,000 / 19.505
= $1,948.217
(A) the size of the periodic payment = $1,948.217
(B) the outstanding principal after payment 24 = $10,540.64
(C) Interest paid on 25th Payment = $320.20
(D) Principal repaid in Payment 25 = $1,628.01
If there is any doubt please ask in comments
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jeff jeffy answered 1 year agoRelated Solutions
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