Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

$100,000 at 10% per year interest. What loan in 7 years? Draw the cash flow diag

ID: 2810901 • Letter: #

Question

$100,000 at 10% per year interest. What loan in 7 years? Draw the cash flow diagram. would be the loan payment each year if the graduate plans to pay off the a. (4+1 pts) b. The graduate changes his mind and decides to pay off his loan aggressively. So $25,045 per year (instead of the amount calculate above (in problem 2a)) for 5 years only for the same loan amount of $100,000 he has borrowed. What would be the interest rate that he would then be paying he plans to pay an amount of Draw the cash flow diagram. (4+1 pts)

Explanation / Answer

PV = 100,000, FV = 0, rate = 10%, N = 7

use PMT funciton in Excel

annual payments = 20,540.55

b.

PV = 100,000, FV = 0, PMT = -25,045, N = 7

use rate funciton in Excel

rate of interest = 16.39%