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What is the total amount of interest the company has to pay

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Question - A company borrows $1.2 million to produce a project. The term of the loan is 20 years; the nominal interest rate is 6% p.a. The company takes an annuity loan.

a) Determine the annuity.

b) Prepare an amortization schedule showing the first three years and the last two years.

c) What is the total amount of interest the company has to pay?

d) What is the effective interest rate of this loan agreement?

e) Assume now the loan is served monthly. Would the effective interest rate be higher, lower or the same than in d)?

f) What would be the annual repayment if the loan were a constant payment loan?

Reference no: EM132813612

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