Ask Question
12 March, 11:47

You need $10,000 to purchase a used car. Your wealthy uncle is willing to lend you the money as an amortized loan. He would like you to make annual payments for 5 years, with the first payment to be made one year from today. He requires a 6% annual return. What will be your annual loan payments? Do not round intermediate calculations. Round your answer to the nearest cent. $ How much of your first payment will be applied to interest and to principal repayment? Do not round intermediate calculations. Round your answers to the nearest cent. Interest: $ 600 Principal repayment: $

+5
Answers (1)
  1. 12 March, 14:50
    0
    a) Equal installment=$1,978.30

    b) Principal and interest payment for the first year

    Interest - $600

    Principal = $1,378.3

    Explanation:

    a) Equal annual installment

    The annual equal installment = Loan amount / Annuity factor

    Annuity factor = (1 - (1+r) ^ (-n)) / r

    r-6%, n-5,

    Annuity factor - (1 - (1.06) ^ (-5)) / 0.06 = 5.0548

    Equal installment = 10,000/5.0548 = $1,978.30

    b) Principal and interest payment for the first year

    Interest payment = 6% * $10,000 = $600

    Principal payment = Installment - interest

    = 1,978.30 - 600

    = $1,378.3
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “You need $10,000 to purchase a used car. Your wealthy uncle is willing to lend you the money as an amortized loan. He would like you to ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers