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suppose that a firm has borrowed $10,000 in the current year at 8.75% interest rate, with a commitment to repay the loan ( principal and interest ) in equal annual instalments over the following 5 years . Calculate: ( a ) the amount of the annnual repayment . ( 2 marks )
( b ) the stream of annual principal payments ( 2 marks )
( c ) The stream of interest payments which can be entered in the tax calculation of the private benefit-cost analysis.
anyway can anyone show the way of payment and pls list out the principle and interest in annually.
in this way
http://www.adventuresineducation.org/Calculators/Loan/index.cfm
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suppose that a firm has borrowed $10,000 in the current year at 8.75% interest rate, with a commitment to repay the loan ( principal and interest ) in equal annual instalments over the following 5 years .
Calculate: ( a ) the amount of the annnual repayment . ( 2 marks )
This is a simple annuity problem. Take note that
A = $10,000 (loan amount)
R = equal annual installments (to be determined)
j = .0875 (assumed to be the nominal interest rate)
m = 1 (interest period, as in annually assumed since the problem statement was rather vague)
t = 5 years (term of loan)
You then solve for R in the following amortization equation:
Calculate: ( b ) the stream of annual principal payments ( 2 marks )
End of Year 1 ≈ $1,679.27
End of Year 2 ≈ $1,826.21
End of Year 3 ≈ $1,986.00
End of Year 4 ≈ $2,159.77
End of Year 5 ≈ $2,348.75
Total = $10,000
Calculate: ( c ) The stream of interest payments which can be entered in the tax calculation of the private benefit-cost analysis.
End of Year 1 = $2,554.27-$1,679.27
End of Year 2 = $2,554.27-$1,826.21
End of Year 3 = $2,554.27-$1,986.00
End of Year 4 = $2,554.27-$2,159.77
End of Year 5 = $2,554.27-$2,348.75
Total = ???
anyway can anyone show the way of payment and pls list out the principle and interest in annually.
What youre asking for is rather difficult without the use of a spreadsheet application. If you wish to see the spreadsheet amortization schedule of this loan, essentially how (a) & (b) were calculated, either post your email address or a token email address on this thread and Ill gladly send you one.
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