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Section 1: Loan Amortization (15 points) Chick-fil-A is considering opening a store at West Point. West Point has offered them a room in Grant Hall.
Section 1: Loan Amortization (15 points) Chick-fil-A is considering opening a store at West Point. West Point has offered them a room in Grant Hall. They will need to purchase the equipment and initial supplies for $750,000. They have secured a 20-year loan from Money Bags Bank for the entire purchase price at an APR of 7.5%, compounded daily. The bank will require monthly payments on the loan beginning at the end of next month (n=1). The Managers have approached you, as an aspiring engineering, to back them up with a few calculations. a) Draw the CF Diagram for this loan. (2 points) b) Calculate the effective interest rate. (2 points) c) Calculate the value of monthly payments using an effective interest rate of 0.65%. (2 points) d) Using the Tabular Method, build an Amortization Table that reflects all of the cash flows and balances through the first three monthly payments, use a monthly payment $6,225 and an effective interest rate of 0.658%. (3 points) Page 2 of 9 e) What is the interest payment in the 45th payment period, use a monthly payment $6,225 and an effective interest rate of 0.658% (n=45)? (2 points) f) What is the principal payment in the 45th payment period (n=45)? (2 points) B) What is the remaining balance on the loan after the 45th payment, use a monthly payment $6,225 and an effective interest rate of 0.658% (n=45)? (2 points)
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