Answered: Morgan received a $29,050 loan from a…

Morgan received a $29,050 loan from a bank that was charging interest at 3.25% compounded semi-annually. a. How much does she need to pay at the end of every 6 months to settle the loan in 6 years?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 19PROB

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

Morgan received a $29,050 loan from a bank that was charging interest at 3.25%
compounded semi-annually.
a. How much does she need to pay at the end of every 6 months to settle the loan in 6
years?

b. What was the amount of interest charged on the loan over the 6-year period?
Round to the nearest cent

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