Assume the monthly payment of a loan amount of $400,000 is $1450. How long will it take to retire the loan if the annual interest rate is 4% ? Use the equation, Monthly payment= Where : P = principal (the amount of your mortgage r = the annual interest rate y = length of the mortgageP∗r12 1−(1+r12 )−12 y Assume the monthly payment of a loan amount of $400,000 is $1450. How long will it take to retirethe loan if the annual interest rate is 4% ?Use the equation,y = length of the mortgageMonthly payment=p.'121+-12 Y1Where :P = principal (the amount of yourmortgager= the annual interest rate

The loans are paid by the monthly payments and these are fixed and equal types of payments and they…

Assume the monthly payment of a loan amount of $400,000 is $1450. How long will it take to retire the loan if the annual interest rate is 4% ? Use the equation, y = length of the mortgage Monthly payment= p.'12 1+ -12 Y1 Where : P = principal (the amount of your mortgage r= the annual interest rate

Assume the monthly payment of a loan amount of $400,000 is $1450. How long will it take to retire the loan if the annual interest rate is 4% ? Use the equation, y = length of the mortgage Monthly payment= p.'12 1+ -12 Y1 Where : P = principal (the amount of your mortgage r= the annual interest rate

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.17: Amortized Loans

Problem 1ST

See similar textbooks

Related questions

Q: Question 11 11) The general rule of thumb when considering financing is to O work more on raising…

A: Financing is referred as the process of the raising the capital or the funds for the different types…

Q: Suppose you are a beneficiary designated to immediately receive P8674 each year for 10 years,…

A: Annuity means a series of annual payments are being made or received. Annuity can be ordinary…

Q: A contractor is calculating the present worth of the salaries of his five employees over the next…

A: Present worth refers to the amount present today that is more valuable than the amount will…

Q: Please help on part 4 while showing work

A: As per Bartleby honor code, when a particular part is asked, the expert is required only to solve…

Q: You purchased some shares in Bandicoots R Us on 19 July 2022, at price $50.58. On 25 December 2022…

A: The effective annual return of the stock will be considering the effect of the time duration of…

Q: Earnest T needs $870 for his next trip to Raleigh. He has $540 in cash. How long in years will it…

A: We will use the concept of time value of money here. As per the concept of time value of money the…

Q: Illustrate your answers by graphing bond prices versus time to LO 2 19. Interest Rate Risk Both Bond…

A: Interest rate or YTM is very much related with the bond value. Increase in interest rate causes the…

Q: A cheese factory wants to protect their purchase price of milk so they hedge in milk futures at a…

A: Basis is the difference between the commodity cash price and futures price.Basis = Cash - Futures…

Q: Critically evaluate the role of exchange rate systems in influencing FDI and trade levels.

A: Foreign direct investment: One of the primary methods of contemporary capital internationalization,…

Q: A mother wishes to have Php800,000 eight years from today for her son’s graduation. How much should…

A: Future value (FV) = Php800,000 Monthly interest rate (r) = 0.0116666666666667 (i.e. 0.14 / 12)…

Q: AXN Sdn Bhd needs to raise RM1, 000,000 in short-term loan for five months. loan from OCBC bank at…

A: Here, Borrowed funds = RM 1,000,000 Time period = 5 months Interest rate = 12% Compensating balance…

Q: e is a European call option on the dollar with strike price of Kc = 94 pence per dollar and a…

A: The call option gives opportunity to buy the stock on expiration but no obligations to do that and…

Q: Colossus Company has the ability to obtain debt financing at 10 percent. It currently has $2,000,000…

A: Given: Cost of debt = 10% Tax rate = 25%

Q: QUESTION 9: Chicago Food Services is considering installing a new refrigeration system that will…

A: It is a technique of determining one return on investment, or ROI, for a project or expenditure.…

Q: Porter Company is analyzing two potential investments Project X $ 75,900 Initial investment Net cash…

A: Payback period = Initial investment/Annual cash inflows

Q: . Find the component costs of debt, preferred stock, and common stock. b. What is the WACC?

A: WACC: It refers to the rate used to discount the projects or investments' cash flows in capital…

Q: WACC Shi Import-Export's balance sheet shows $300 million in debt, $50 million in preferred stock,…

A: WACC means weighted average cost of capital of the company. It means combined cost of capital for…

Q: A put option that expires in six months with an exercise price of $45 sells for $4.25. The stock is…

A: Put call parity represents the relationship between the price of a European call option and the…

Q: A payment of $1,930 is due in 55 days and another payment of $3,600 is due in 300 days. Calculate…

A: Present value of future amount With periodic interest rate (r), period (n) and future value (FV),…

Q: Net Present Value (NPV) • Definition • Formula & Calculation in 6 Steps • 2 Illustrative Examples…

A: Hi, since you have posted a question with multiple sub-parts, we will answer the first three as per…

Q: For the question below use the following figures which illustrate the production possibilities…

A: First let us calculate advantage of Farmer over the rancher.Farmer can produce 4 pounds of potato…

Q: how much must you repay at the end of the 6 months?

A: Information Provided: Amount borrowed = $500 Interest rate = 6% Time = 6 months or 0.5 year…

Q: What does it mean to say “stock prices are nonstationary”?

A: Stock prices will be discovered by continuous interaction of demand and supply. Stock prices are…

Q: Upon graduating from college 35 years ago, Dr. Nick Riviera was already planning for his…

A: Given: Payment made in retirement account as annuity “PMT” = $250 Number of quarters of payment =…

Q: If the minimum rate of return was 11% (instead of the percentage shown above), Division A's residual…

A: Information Provided: Minimum rate of return = 11% Operating Income = $81,900 Average Investment =…

Q: What is the discount rate at which the following cash flows have a NPV of $0? Answer in %, rounding…

A: Internal Rate of Return: It is the rate used in capital budgeting that makes the project's net…

Q: What is the expected return on asset A if the expected return on the market is 8%, the risk-free…

A: Data given: Expected return on the market = 8% Risk-free rate = 4% Beta of asset A = 2 Formula…

Q: As a member of UA Corporation's financial staff, you must estimate the Year 1 cash flow for a…

A: Operating cash flow of the project helps in understanding if the business is able to generate…

Q: What is the most we should pay for a bond with a par value of $1000, coupon rate of 8.8% paid semi…

A: Maturity value or par value (Z) = $1000 Semiannual coupon amount (C) = $44 (i.e. $1000 * 0.088 / 2)…

Q: The financing will be used for purchasing business raw materials, payment for water and electrical…

A: The expenses that cover the day today expenses and current assets of the entity are referred to as…

Q: A loan of $381,000 at 2.72% compounded quarterly was to be settled with month-end payments of…

A: Total amount, A = P(1+(R/100*4))4*3.629

Q: It is conceivable for a stock investor to gain as much as 50% in one year or lose 50% in one year.…

A: Case study: Example: In 2017, five stocks in S&P500 have risen by more than 50% in one year…

Q: he initial book value of a new computer is $74,000 and the computer is to be depreciated…

A: According to the straight-line depreciation method, an equal amount of depreciation expense is…

Q: Suppose you plan to have $70,000 in 25 years from now and you can invest your savings at 6%…

A: Continuous Compounding: Continuous Compounding is a concept that represents an account in which the…

Q: Describe how the Admati and Pfleiderer (1988) model differs from the Kyle (1985) model of equity…

A: An equity market is referred as the place, where the shares as well as stocks of the corporation is…

Q: River Valley Production Inc. seeks to increase its market share and improve its results. The company…

A: Given: Particulars 2018 2019 Accounts receivables $199,000 $305,000 Sales $2,150,000…

Q: BBC issues $4,000,000 perpetual debt that pays 12% annual coupon. The yield of the debt is 12% now.…

Q: What are the different arrangements for who pays the ongoing expenses related to a leased property?…

A: In this question, we will be discussing about different method of ongoing expenses related to a…

Q: purchased for $185,000 pays $5,000 at the end of every quarter. How long will the payments continue…

A: Present value of annuity is amount of equivalent value today that will equivalent to future value of…

Q: First holding period return need to be calculated, then annualized return.

A: Annual rate of return for first 10 years (r1) = 0.12 or 12% Annual rate of return for 10 to 15 years…

Q: n issuer with operations in China is considering raising equity in the US or China. Summarize the…

A: Equity is the way to raise the money without interest or any obligations but raising equity is not…

Q: Debt is riskier than equity, and therefore only higher returns on debt are required in order to…

A: Company requires funding for their investment which can be obtained from broadly two sources.…

Q: Suppose you get paid every two weeks. You determine that you can afford to divert $80 from each…

A: We will use the concept of time value of money here. As per the concept of time value of money the…

Q: The S&P 500 is currently at a value of 4,130 (as of July 29th, 2022 market close). On the same day,…

A: The futures price can be determined with the formula below:Futures Price = Spot price x e(r-y)T =…

Q: Two treasury bonds (with semi-annual coupons) are traded. The first bond matures in six months, has…

A: Bond 1: Annual coupon rate = 6% Semi-annual rate = 6%/2 = 3% Dirty price “P” = $99.50 Let Face Value…

Q: Compute the future value in year 7 of a $5,800 deposit in year 1, and another $5,300 deposit at the…

A: Cash flow at year 1 = $5,800 Cash flow at year 4 = $5,300 Interest rate = 0.08 or 8% Future value in…

Q: Why there is a need for exporters to understand “International Commercial Documents” which directly…

A: In international trade, a number of documents are created to protect both parties from counter…

Q: SodaFizz has debt outstanding that has a market value of $3 million. The company’s stock has a book…

A: Market value of debt = $3 million Market value of equity = $6 million Total capital = $9 million…

Q: The production machinery of Xaghogh is nearing the end of its useful life an be replaced. Forecasts…

A: Net present value is the difference between the present value of cash flow and initial investment of…

Q: Which of the statement is FALSE Yang mana satu penyataan adalah SALAH? Select one: A. Capital is…

A: Accounting equation is one of the important component of accounting field. Three main elements of…

Concept explainers

Amortized Loans

The term "amortization" refers to spreading the value of a loan or a debt over a series of regular payments or installments comprising of both the principal and interest amount. It generally involves the process where in the value of a loan or an intangible asset is written down over its maturity period.

Question

Assume the monthly payment of a loan amount of $400,000 is $1450. How long will it take to retire the loan if the annual interest rate is 4% ?

Use the equation,

Monthly payment=

Where :

P = principal (the amount of your mortgage

r = the annual interest rate

y = length of the mortgage

P∗r12

1−(1+r12 )−12 y

Assume the monthly payment of a loan amount of $400,000 is $1450. How long will it take to retire
the loan if the annual interest rate is 4% ?
Use the equation,
y = length of the mortgage
Monthly payment=
p.'12
1+
-12 Y1
Where :
P = principal (the amount of your
mortgage
r= the annual interest rate

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Calculating interest and APR of installment loan. Assuming that interest is the only finance charge, how much interest would be paid on a 5,000 installment loan to be repaid in 36 monthly installments of 166.10? What is the APR on this loan?
Suppose you purchase a home and obtain a 15-year fixed-rate loan of $195,000 at an annual interest rate of 6.0%. a) What is your monthly payment? N: months I %: P.V: $ PMT: $ F.V: 0 P/Y: 12 C/Y: 12 b) Of the first month's mortgage payment, how much is interest? HINT: I=Prt Interest: I=$ c) Of the first month's mortgage payment, how much is applied to the principal? HINT: PMT - Interest Amount Applied to Principal: $ d) How much is your outstanding balance after the first month’s payment? HINT: Principal - Amount Applied to Principal Outstanding Balance after first payment: $
Give typing answer with explanation and conclusion If the annual payment mortgage constant for an amortizing loan is 10.6%, and the loan amount is $25,000,000, what is the annual payment?
A mortgage has the following terms: Amount: $750,000 Rate: 6.25% Amortization (Years): 30 Term (Years): 20 Please determine the following: What is the Monthly Payment? In preparing an Income Statement, what is the Interest Expense for years 1 – 5? What is the Principal Balance at the end of year 6? What is the value of the loan at the expiration? If rates remain constant (flat), what would the benefit be to refinance this loan after year 10? do all the questions 1-5 and show the formulas in excel and show how you got it
A. what is the Monthly Payment ? what is the total interest paid ? B. time to pay off mortgage if extra $100 is added ? total interest saved ? I will rate thakn you!
a. What will be the monthly payment on a 30-year, $250,000 mortgage loan, where the interest rate is 6% per year, compounded monthly? How much interest is paid over the life of the loan? b. What will be the monthly payment on a 30-year, $250,000 mortgage loan, where the interest rate is 6% per year, compounded continuously? How much interest is paid over the life of the loan? c. What will be the monthly payment on a 15-year, $250,000 mortgage loan, where the interest rate is 6% per year, compounded monthly? How much interest is paid over the life of the loan?
The following loan is a simple interest amortized loan with monthly payments. $155000, 9 1/2%, 30 years(a) Find the monthly payment. (Give your answer to the nearest cent.)Payment $ (b) Find the total interest for the given simple interest amortized loan. (Give your answer to the nearest cent.)Total interest $
(a) Find the monthly mortgage payment on a $170000 15-year mortgage if the interest rate on the loan is 3.81%. (b) How much will you pay in interest over the life of the loan if you pay the minimum monthly payment each month?
You want to take a $172260 mortgage at j2 = 11.59 % and can afford topay up to $5030 per quartely. What repayment period in the whole years should you request ? What will be your payment year to repay mortgage in calculatednumber of years ?
Assume that you have taken out a 30-year mortgage of $240,000 and that your monthly payments are 1,853.90. What is your annual interest rate on the mortgage loan? (find the closest answer)8.55 % 8.61 % 8.89 % 9.1490 9.45%
1. You have just obtained a commercial mortgage for $6.25M with a 5-year term, 25-year amortization period and 6.50% mortgage interest rate. (a) Construct an amortization table for the term of the loan assuming annual payments. What is the annual payment? What is the balance at maturity? (b) What is the e¤ective cost of borrowing if the borrower pays an origination fee of $30,000? (c) The borrower can repay the balance of the loan at any time prior to its maturity, but must pay a penalty of 5% of the outstanding balance. What is the cost of borrowing if the borrower pays an origination fee of $30,000 and pays off the remaining balance of the loan after making payments for 4 years?
9) Mortgage Payment You take out a 20-year fixed mortgage. The annual interest rate is ? = 0.10 and the monthly payment is $4,000. a. What is the total amount of this Mortgage? E.g., What is the PV of this mortgage payment stream? b. If you make an additional payment of $4,000 in period t=1 and period t=2, how long will it take to repay the mortgage?