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Unformatted text preview: rest rate on the
loan is 13%. As part of her firm’s detailed financial planning, Liz wishes to
determine the annual interest deduction attributable to the loan. (Because it is a
business loan, the interest portion of each loan payment is tax-deductible to the
a. Determine the firm’s annual loan payment.
b. Prepare an amortization schedule for the loan.
c. How much interest expense will Liz’s firm have in each of the next 3 years as
a result of this loan? LG6 4–45 Monthly loan payments Tim Smith is shopping for a used car. He has found
one priced at $4,500. The dealer has told Tim that if he can come up with a
down payment of $500, the dealer will finance the balance of the price at a 12%
annual rate over 2 years (24 months).
a. Assuming that Tim accepts the dealer’s offer, what will his monthly (end-ofmonth) payment amount be?
b. Use a financial calculator or Equation 4.15a (found in footnote 9) to help
you figure out what Tim’s monthly payment would be if the dealer were
willing to finance the balance of the car price at a 9% yearly rate. 184 PART 2 Important...
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