Question
In: Finance
7. Suppose that you are planning to take a four-year loan of $200,000 for your program....
7. Suppose that you are planning to take a four-year loan of $200,000 for your program. The interest rate of this loan is 7% and its compounds annually. What would be the amount of interest?
8. Assume that a $50,000 investment is held for five years in a savings account with 5% simple interest paid annually. What is the future value of such investment?
Solutions
Expert Solution
| Q7 | |||
| Time | Opening Balance | Interest | Closing Balance |
| 1.00 | 200,000.00 | 14,000.00 | 214,000.00 |
| 2.00 | 214,000.00 | 14,980.00 | 228,980.00 |
| 3.00 | 228,980.00 | 16,028.60 | 245,008.60 |
| 4.00 | 245,008.60 | 17,150.60 | 262,159.20 |
| Total Amount of interest over 4 years | 62,159.20 | ||
| Q8 | |||
| Amount of investment | 50,000.00 | ||
| Simple Interest | 5% | ||
| Amount of interest per year | 2,500.00 | ||
| Interest for 5 years = 2500*5 | 12,500.00 | ||
| Future Value of investment = 50,000 + 12,500 | 62,500.00 | ||
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