Author Question: If you borrow 5,000 at an annual interest rate of 9.0 for six years, what will your repayment(s) be ... (Read 67 times)

sdfghj · **on:** Jul 10, 2018

If you borrow 5,000 at an annual interest rate of 9.0 for six years, what will your repayment(s) be if this is an interest-only loan?

What will be an ideal response?

Question 2

Assume a five-year equal payment amortization schedule with an annual interest rate of 12 and annual payments. If the beginning principal is 8,000, then the first interest payment will be how large?

A) 960.00
B) 1,200.00
C) 2,219.28
D) There is not enough information to answer this question.

jackie · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

Answer: Annual payments for the first five years of interest only = (r) (PV) = .09 5,000 = 450.00. The final payment in year 6 will be the last interest payment plus the principal amount = 450 + 5,000 = 5,450.

Answer to Question 2

Answer: A
Explanation: A) The first payment will be equal to the beginning balance times the annual interest rate = 8,000 .12 = 960.00.