Making the additional payment and shortening the loan

Assignment Help Financial Management

Reference no: EM13877804

A loan is being repaid with 20 annual payments of $180 each. At the time of the 5th payment, the borrower is allowed to pay an extra $300 and to repay the remaining outstanding balance over the next 11 years with revised level annual payments. If the effective interest rate is 4%, how much interest did the borrower save by making the additional payment and shortening the loan? (Note; this is the total dollar amount of interest saved; not the present value or accumulated value of the interest saved.)

Reference no: EM13877804

Questions Cloud

Total return to ahmed from owning the stock : Ahmed purchased a stock for $45 one year ago. The stock is now worth $65. During the year, the stock paid a dividend of $2.50. What is the total return to Ahmed from owning the stock?

What is your rate of return-interest paid in margin account : You open a brokerage account on January 1 and sell short 500 shares of Apple Computer at $163.39 per share. The initial margin requirement is 50%. Assume that Apple pays an annual dividend on December 31 of $5.50 per share, the price of the stock is ..

Calculate the market risk premium : A stock has the same level of systematic risk as the market. The stock has an expected return of 14%. The risk free rate is 5%. Calculate the market risk premium.

Brokerage account-what is your new margin balance : You open a brokerage account and purchase 200 shares of Google at $443.05 per share. You borrow 40% from your broker to help pay for the purchase. The interest rate on the loan is 8%. One year after purchase, Google’s price is $320. What is your new ..

Making the additional payment and shortening the loan : A loan is being repaid with 20 annual payments of $180 each. At the time of the 5th payment, the borrower is allowed to pay an extra $300 and to repay the remaining outstanding balance over the next 11 years with revised level annual payments. If the..

What is the portfolio turnover rate : The composition of the Dominion Fund portfolio is as follows: STOCK SHARES PRICE A 200,000 $31 B 300,000 $46 C 400,000 $14 D 600,000 $23 Assume that during the year the portfolio manager sells all of the holdings of Stock D and replaces it with 200,0..

What was the rate of inflation : The April 21, 2015 University Press reported that faculty salaries rose an average of 3.1% in the past year, but after adjusting for inflation, there was actually an average decrease of 0.3%. What was the rate of inflation?

Calculate effective annual yield rate : On Becca’s 1st birthday, a savings account was opened for her containing $10,000. By her 5th birthday, the account had grown to $13,500 and $1000 was added. By her 13th birthday the account had grown to $17,000 and $2000 was added. Use the time-weigh..

Equivalent time-weighted annual effective interest rate : An investment account was initiated with an investment of $1000. The fund had grown to $1200 after one year, and an additional $1000 was invested. The fund balance at the end of two years was $2200. What annual effective interest rate was earned in t..

User Account

All Pages