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Unformatted text preview: res the firm
to pay $5,000 in principal each year plus
interest for that year.
Click on the Excel icon to see the amortization
table 57 Amortized Loan with Fixed
Payment - Example
Payment Each payment covers the interest expense plus reduces
principal Consider a 4 year loan with annual payments. The
interest rate is 8% and the principal amount is $5,000.
interest What is the annual payment?
CPT PMT = -1,509.60 Click on the Excel icon to see the amortization table 58 Work the Web Example There are web sites available that can easily prepare
Click on the web surfer to check out the Bankrate.com
site and work the following example
You have a loan of $25,000 and will repay the loan
over 5 years at 8% interest.
over What is your loan payment?
What does the amortization schedule look like? 59 Quick Quiz – Part VI What is a pure discount loan? What is a good
example of a pure discount loan?
What is an interest-only loan? What is a good
example of an interest-only loan?
What is an amortized loan? What is a good
example of an amortized loan?
example 60 6 Formulas
End of Chapter 61
61 Comprehensive Problem An investment will provide you with $100 at the end of
each year for the next 10 years. What is the present
value of that annuity if the discount rate is 8%
What is the present value of the above if the payments
are received at the beginning of each year?
If you deposit those payments into an account earning
8%, what will the future value be in 10 years?
What will the future value be if you opening the account
with $1,000 today, and then make the $100 deposits at
the end of each year?
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