How much will the borrower still owe in remaining principle

Assignment Help Financial Management

Reference no: EM131190796

Using the formula for an annuity, what are the monthly payments on a 5-year fixed-rate car loan for $20,000 if the effective annual rate is .035 (3.5 percent)? Assume the first payment is exactly one month (1/12th of a year) from now. (The effectively monthly rate is then (1.035)(1/12) -1.

After 2 years, when there are 3*12 = 36 monthly payments left (with the next payment being exactly 1 month in the future), how much will the borrower still owe in remaining principle?

Next consider a loan where you can make the payments twice a month (still for 5 years), with the first payment in exactly half a month (1/24th of a year). The effective annual rate on this loan is also .035 (3.5%). What are the twice-monthly payments? How does 2 times the twice-monthly payment compare to a single monthly payment? Why is it bigger/smaller?

In 2 years (after 2*12*2 = 48 twice-monthly payments have been made), when there are 3*12*2= 72 remaining payments to be made (with the next payment being exactly half a month from then), how much will the borrower still owe in remaining principle? Is the answer different between the monthly-payment loan and the twice monthly-payment loan? Why?

Reference no: EM131190796

Questions Cloud

They more of less misleading as the frequency increases : What are the effective annualized rates for each of the following annual stated rates and compounding frequencies? What can you conclude about the degree to which stated rates are misleading given (1) the level of interest rates and (2) the frequency..

What is the nature of management : Do leaders exert power and influence in similar ways with all their group members or is there evidence for individualized power assertions targeting individuals in unique dyads?

Calculate the range and the standard deviation : FNS60215 Advanced Diploma of Accounting. Listed below are the earnings of a group of accounting graduates in their first year at work. All amounts are in thousands of dollars: Calculate the range and the standard deviation

What is the dividend yield : What is the dividend yield? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

How much will the borrower still owe in remaining principle : Using the formula for an annuity, what are the monthly payments on a 5-year fixed-rate car loan for $20,000 if the effective annual rate is .035 (3.5 percent)? Assume the first payment is exactly one month (1/12th of a year) from now. (The effectivel..

Required return on the company stock : What is the required return on the company's stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Intervening in financial markets : Central banks sometimes try to effect the exchange rates by intervening in financial markets. (1) Why do they want to influence exchange rates?

Design the circuit that checks for zero in the p counter : How many bits are in the P counter, and what is the binary number loaded into it initially?

What is the beta of your portfolio : You own $18,615 of Human Genome stock that has an assumed beta of 3.56. You also own $13,870 of Frozen Food Express (assumed beta = 1.69) and $4,015 of Molecular Devices (assumed beta = 0.54). What is the beta of your portfolio?

User Account

All Pages