# Week_4_Answers - Question 3, Part 1 Solution Rate 9% APR...

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Unformatted text preview: Question 3, Part 1 Solution Rate 9% APR Periods 4 years Payments Interest only annual PV \$18,000 FV \$0 Year Interest Balance \$18,000.00 1 \$1,620.00 \$19,620.00 (\$1,620.00) \$0.00 (\$1,620.00) \$18,000.00 2 \$1,620.00 \$19,620.00 (\$1,620.00) \$0.00 (\$1,620.00) \$18,000.00 3 \$1,620.00 \$19,620.00 (\$1,620.00) \$0.00 (\$1,620.00) \$18,000.00 4 \$1,620.00 \$19,620.00 (\$1,620.00) \$0.00 (\$1,620.00) \$18,000.00 You have decided to purchase a small tract of land for building a new home on the outskirts of town. You have some money available but need a loan of \$18,000 to make the purchase. The land will be owner-financed over 4 years with end-of- year payments. The interest rate is 9 percent. Develop an Excel® table to illustrate the payment amounts and schedule for the loan, assuming payback as follows: Method 1. Pay the accumulated interest at the end of each interest period and repay the principal at the end of the loan period. Balance + Interest Interest Payment Principal Payment Total Payment Question 4, Part 2 Solution Rate 9% APR Periods 4 years \$4,500.00 annual PV \$18,000 FV \$0 Year Interest Balance \$18,000.00 1 \$1,620.00 \$19,620.00 (\$1,620.00) (\$4,500.00) (\$6,120.00) \$13,500.00 2 \$1,215.00 \$14,715.00 (\$1,215.00) (\$4,500.00) (\$5,715.00) \$9,000.00 3 \$810.00 \$9,810.00 (\$810.00) (\$4,500.00) (\$5,310.00) \$4,500.00 4 \$405.00 \$4,905.00 (\$405.00) (\$4,500.00) (\$4,905.00) \$0.00 You have decided to purchase a small tract of land for building a new home on the outskirts of town. You have some money available but need a loan of \$18,000 to make the purchase. The land will be owner-financed over 4 years with end-of-year payments. The interest rate is 9 percent. Develop an Excel® table to illustrate the payment amounts and schedule for the loan, assuming payback follows: Method 2. Make equal principal payments, plus interest on the unpaid balance at the end of the period. Principal Payment Balance + Interest Interest Payment Principal Payment Total Payment Question 5, Part 3 Solution Rate 9% APR Periods 4 years (\$5,556.04) annual PV \$18,000 FV \$0 Year Interest Balance \$18,000.00 1 \$1,620.00 \$19,620.00 (\$5,556.04) \$14,063.96 2 \$1,265.76 \$15,329.72 (\$5,556.04) \$9,773.68 3 \$879.63 \$10,653.32 (\$5,556.04) \$5,097.28 4 \$458.76 \$5,556.04 (\$5,556.04) \$0.00 You have decided to purchase a small tract of land for building a new home on the outskirts of town. You have some money available but need a loan of \$18,000 to make the purchase. The land will be owner-financed over 4 years with end-of-year payments. The interest rate is 9 percent. Develop an Excel® table to illustrate the payment amounts and schedule for the loan, assuming payback follows: Method 3. Make equal end-of-period payments Equal Payments Balance + Interest Interest Payment Principal Payment Total Payment Question 6, Partt 4...
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## This note was uploaded on 02/15/2012 for the course MBA 101 taught by Professor X during the Spring '11 term at Shawnee.

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Week_4_Answers - Question 3, Part 1 Solution Rate 9% APR...

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