Cooley Landscaping needs to borrow 35,000 for a new front-end dirt loader. The bank is willing...
Cooley Landscaping needs to borrow 35,000 for a new front-end dirt loader. The bank is willing to loan the money at 7.5% interest for the next
7 years with annual,semiannual,quarterly,or monthly payments. What are the different payments that Cooley Landscaping could choose for these different payment plans?
Homework Answers
1.Annual payment
Information provided:
Present value= $35,000
Time= 7 years
Interest rate= 7.5%
The amount of annual payment is calculated by entering the below in a financial calculator:
PV= -35,000
N= 7
I/Y= 7.5
Press the CPT key and PMT to compute the amount of annual payment.
The value obtained is 6,608.01.
Therefore, the amount of annual payment is $6,608.01.
2.Semi-annual payment
Information provided:
Present value= $35,000
Time= 7 years*2= 14 semi-annual periods
Interest rate= 7.5%/2= 3.75% per semi-annual period
The amount of semi-annual payment is calculated by entering the below in a financial calculator:
PV= -35,000
N= 14
I/Y= 3.75
Press the CPT key and PMT to compute the amount of semi-annual payment.
The value obtained is 3,258.96.
Therefore, the amount of semi-annual payment is $3,258.96.
3.Quarterly payment
Information provided:
Present value= $35,000
Time= 7 years*4= 28 quarters
Interest rate= 7.5%/4= 1.8750% per quarter
The amount of quarterly payment is calculated by entering the below in a financial calculator:
PV= -35,000
N= 28
I/Y= 1.8750
Press the CPT key and PMT to compute the amount of quarterly payment.
The value obtained is 1,618.13.
Therefore, the amount of quarterly payment is $1,618.13.
4.Monthly payment
Information provided:
Present value= $35,000
Time= 7 years*12= 84 months
Interest rate= 7.5%/12= 0.6250% per month
The amount of monthly payment is calculated by entering the below in a financial calculator:
PV= -35,000
N= 84
I/Y= 0.6250
Press the CPT key and PMT to compute the amount of monthly payment.
The value obtained is 536.84.
Therefore, the amount of monthly payment is $536.84.
In case of any query, kindly comment on the solution.
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