Five years ago John entered into a loan agreement to borrow $200,000, and repay the loan the loan over 20 years through equal monthly instalments. if the interest rate was fixed at 8% p.a. for the entire term of the loan, compute the value of the loan outstanding now: ---------------- a) $175,051; b) $173,500; $ 173,288
2007-12-31 13:07:26 · 2 answers · asked by mmsmms2110 1 in Education & Reference ➔ Higher Education (University +)
The formula for an annuity is:
PV = A/r - A/(r*(1+r)^N)
where PV = present value = 200,000
A is the periodic payment.
r = the periodic interest rate = 8%/12
N = number of payments = 240 at initiation
First -- solve for A using the full 20 years to get the monthly payment. Then use that number and N=15*12 to get the current PV.
2007-12-31 13:18:48 · answer #1 · answered by Ranto 7 · 0⤊ 0⤋
Andy H? Aren't you trying to resolve an answer from your homework? Time to get the thinking cap on and figure it out because there is a lot of individual time in real life. Live or die by your laurals.
2007-12-31 13:20:58 · answer #2 · answered by googie 7 · 1⤊ 0⤋