Question
Prepare a monthly payment schedule for each loan below using Excel, and submit it. ADD ON LOAN: Monthly payment = (4500+4500*18%*5)/60 = $ 142.50 Answer
Prepare a monthly payment schedule for each loan below using Excel, and submit it.
ADD ON LOAN: | ||
Monthly payment = (4500+4500*18%*5)/60 = | $ 142.50 | Answer |
Total amount of interest = 4500*18%*5 = | $ 4,050.00 | Answer |
True interest rate: | ||
It is the IRR of the resulting cash flows. | ||
We have | ||
4500 = 142.5*PVIFA(irr/12,60) | ||
31.5790 = PVIFA(irr/12,60) | ||
The value of irr has to be found by trial and error. | ||
Using an online calculator | ||
for irr/12 = 0.024, the interest factor = 31.6253 | ||
for irr/12 = 0.025, the interest factor = 30.9087 | ||
The exact value of irr/12 = 0.024+0.001*(31.6253-31.5780)/(31.6253-30.9087) = | 2.41% | |
IRR = 0.024066*12 = | 28.88% | Answer |
COMPOUND INTEREST LOAN: | ||
Using the formula for loan amortization | ||
Monthly payment = 4500*(0.18/12)*(1+0.18/12)^60/((1+0.18/12)^60-1)) = | $ 114.27 | Answer |
Total amount of interest = 60*114.27 -4500 = | $ 2,356.20 | Answer |
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