Question
Build a short-term loan model, allowing terms out to 5 years. Take the term, annual interest rate, and principal balance as inputs. Either calculate the
Build a short-term loan model, allowing terms out to 5 years. Take the term, annual interest rate, and principal balance as inputs. Either calculate the required payment or use a payment input cell. Use your model to answer the following questions:
- with a term of 5 years and a rate of 5%, what should payments be for a $10,000 loan
- how many months will it take to pay off the loan if payments are $1,000
- if all payments but the last payment are $1,000, how much should be paid off in the last month to leave $0 due?
Add a discount factor to your model. Use another input for the appropriate opportunity cost of capital.
- what is the PV of the payments if the discount rate is 5%
- what is the loan's NPV to the customer if the discount rate is 4%? 6%?
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