Question

In: Accounting

On a loan of 50,000 for 30 years at 6.8% annually the lender wants the interest...

On a loan of 50,000 for 30 years at 6.8% annually the lender wants the interest paid annually and the principal repaid at the end of the 20 years. The borrower makes annual level payments into a sinking fund to raise the 50,000. The fund earns 5.8% annually. What are the borrowers total annual payments?

Solutions

Expert Solution

Total annual payments = sinking fund payment + interest payment

Payment required = FV*r /[(1+r)^n -1]
Future value FV                                  50,000.00
Rate per period r
Annual interest 5.8%
Number of payments per year 1
Interest rate per period 0.058/1=
Interest rate per period 5.800%
Number of periods n
Number of years 20
Periods per year 1
number of periods 20
Sinking fund payment = 50000*0.058/ [(1+0.058)^20 -1]
=                                    1,388.72
Add: loan interest                                    3,400.00
Total annual payment                                    4,788.72

Total annual payment is $4,788.72


Related Solutions

If $36,500 is invested at 6.8% for 30 years, find the future value if the interest...
If $36,500 is invested at 6.8% for 30 years, find the future value if the interest is compounded the following ways. (Round your answers to the nearest cent.) (a) annually $   (b) semiannually $   (c) quarterly $   (d) monthly $   (e) daily (N = 360) $   (f) every minute (N = 525,600) $   (g) continuously $   (h) simple (not compounded) $
A lender wants an EY of 4.00% and expects an average loan payoff in 7 years....
A lender wants an EY of 4.00% and expects an average loan payoff in 7 years. However, a particular borrower wants to borrow $400,000 for 30 years at 3.20%, compounded monthly. First, without charging a prepayment penalty, how many discount points must the lender charge to have an EY of 4%. Assume no other fees to close the loan other than discount points. Second, without charging discount points, how much of a prepayment penalty (in terms of dollars) will the...
A man has a loan of 50,000 for 10 years ay 6.5% annually with annual payments....
A man has a loan of 50,000 for 10 years ay 6.5% annually with annual payments. His payments are 4500 for the first 5 years and X for the next 5 years. Find X.
In underwriting a new 30-year, monthly payment mortgage loan at5% interest for Jackie, the lender...
In underwriting a new 30-year, monthly payment mortgage loan at 5% interest for Jackie, the lender requires that Jackie meet three ratios to be approved for the loan.First, the payment on her loan plus the monthly cost of homeowner's insurance of $200 plus monthly property taxes of $225 plus monthly home owner association fees of $100 can be no more than 28% of her gross monthly income.Second, the monthly total of the four items above plus her car loan payment...
1. You get a $15,000 car loan for 4 years at 6.75% interest. The lender charges...
1. You get a $15,000 car loan for 4 years at 6.75% interest. The lender charges $250 for an origination fee (which is added to your loan amount). What is your APR? 2. You buy furniture for $2,500. You pay $300 down and the retailer finances the remainder with 36 monthly payments of $80. Calculate your APR.
Donna, a registered nurse, earns $50,000 annually. She is 30 years old (date of birth is...
Donna, a registered nurse, earns $50,000 annually. She is 30 years old (date of birth is April 30, 1990) and her plans are to get married, raise a family and continue to work because she likes her job and enjoys the financial freedom. She is planning to retire at age 67 at which time she expects to receive Social Security retirement benefits and her own retirement benefits that she hopes to be able to accumulate between now and her retirement...
An ARM is made for $50,000 for 30 years with the following terms: Initial interest rate...
An ARM is made for $50,000 for 30 years with the following terms: Initial interest rate = 1 percent                 Index = 1-year Treasuries Payments reset each year                         Margin = 200 basis points Interest rate cap = none                            Payment cap = none Discount points = 1 point Negative amortization is not allowed Based on estimated forward rates, the 1-year Treasury yields to which the ARM is tied is forecasted as follows: Beginning of year (BOY) 2 = one percent (1%); (BOY)...
A borrower and lender agree that a 9,000,000 loan made at 12% interest for 30years will...
A borrower and lender agree that a 9,000,000 loan made at 12% interest for 30years will have a 600,000 balance on the maturity date if the loan will be on constant amortization mortgage (CAM) terms. Determine how much will be paid monthly and prepare a loan payment schedule for the first 4 months.
A) For a loan of $160,000 at 7% annual interest, monthly payments, for 30 years, how...
A) For a loan of $160,000 at 7% annual interest, monthly payments, for 30 years, how much total interest will be paid over the life of the loan? Group of answer choices $279,785.00 $81,002.00 $223,214.00 $265,778.00 B) For a loan of $250,000 at 6% annual interest, with monthly payments over 15 years, if you pay an additional $100 in principle per month, how much total interest will you pay over the life of the loan? Group of answer choices $218,090.00...
Yassine took a loan of $6,744.29. The rate of interest is 5% compounded annually. The loan...
Yassine took a loan of $6,744.29. The rate of interest is 5% compounded annually. The loan is to be repaid by annual payments of $500 at the end of each year for 23 years. What is the outstanding balance of the loan after the third payment? ​
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT