Time to repay installment loan Personal Finance ProblemMia Salto wishes to deter
ID: 2785778 • Letter: T
Question
Time to repay installment loanPersonal Finance ProblemMia Salto wishes to determine how long it will take to repay a loan with initial proceeds of
$18 comma 00018,000
where annual end-of-year installment payments of
$3 comma 5223,522
are required.a.If Mia can borrow at an annual interest rate of
1414%,
how long will it take for her to repay the loan fully?b.How long will it take if she can borrow at an annual rate of
1111%?
c.How long will it take if she has to pay
1717%
annual interest?d. Reviewing your answers in parts
a,
b,
and
c,
describe the general relationship between the interest rate and the amount of time it will take Mia to repay the loan fully.
a. If Mia can borrow at an annual interest rate of
1414%,
the amount of time it will take for her to repay the loan fully is
nothing
years.(Round to two decimal places.)
Explanation / Answer
a.
use financial calculator
PV=-18000
PMT=3522
FV=0
1/Y=14
Click CPT
Click N=9.59 years
the above is the answer
b.
use financial calculator
PV=-18000
PMT=3522
FV=0
1/Y=11
Click CPT
Click N=7.91 years
the above is the answer
c.
use financial calculator
PV=-18000
PMT=3522
FV=0
1/Y=17
Click CPT
Click N=12.94 years
the above is the answer
d.
as interest rates are higher then will be higher cost of installments which would result in more time to pay back loan, so there is direct relationship between interest rates and amount of time.
the above is the answer
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