your company is planning to borrow $2 million on a 7 year, 11%, annual payment,
ID: 2774825 • Letter: Y
Question
your company is planning to borrow $2 million on a 7 year, 11%, annual payment, fully amortized term loan . what fraction of the payment made at the end of second year will represent repayment of principal? your company is planning to borrow $2 million on a 7 year, 11%, annual payment, fully amortized term loan . what fraction of the payment made at the end of second year will represent repayment of principal? your company is planning to borrow $2 million on a 7 year, 11%, annual payment, fully amortized term loan . what fraction of the payment made at the end of second year will represent repayment of principal?Explanation / Answer
Annual payment = Loan Amount/Annuity Factor
Annual payment = 2000000/ ((1-(1+11%)^-7)/11%)
Annual payment = $ 424,430.54
Interest payment in 1st year = 2000000*11% = 220000
Prinicipal Payment in 1st Year = 424430.54 - 220000
Prinicipal Payment in 1st Year = $ 224,430.54
Amount Outstanding after 1st Payment = 2000000-224430.54
Amount Outstanding after 1st Payment = $ 1775569.46
Interest payment in 2nd year =1775569.46*11% = 195312.64
Prinicipal Payment in 2nd year = 424430.54 - 195312.64
Prinicipal Payment in 2nd year = $ 229,117.90
Answer
Prinicipal Payment in 2nd year = $ 229,117.90
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