HomeworkLib
Question
I need it written or typed out, not excel solution

A loan of £50,000 is repaid by annual payments of £4000 in arrear over a period of 20 years. What is the effective rate of in
business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Using the Ammortization method

Loan Principal L = (Payment Amount) × an|i

50000 = 4000 * a(20)|(i)

50000/4000 = [1-(1+x)^(-20)]/x

12.5x= 1-(1+x)^(-20)

x= 0.05

Hence the effective Rate of Interest per annum is 5%.

0 0
Add a comment
Know the answer?
Add Answer to:
I need it written or typed out, not excel solution A loan of £50,000 is repaid...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • A loan of £50,000 is repaid by annual payments of £4000 in arrear over a period...

    A loan of £50,000 is repaid by annual payments of £4000 in arrear over a period of 20 years. what is the effective rate of interest per annum?

  • A loan of £50,000 is repaid by annual payments of £4000 in arrear over a period...

    A loan of £50,000 is repaid by annual payments of £4000 in arrear over a period of 20 years. What is the effective rate of interest per annum?

  • Problem 3. A loan of $10,000 is being repaid with payments of $1,000 at the end...

    Problem 3. A loan of $10,000 is being repaid with payments of $1,000 at the end of each year for 20 years. If each payment is immediately reinvested at 5% effective, find the effective annual rate of interest earned by the lender over the 20-year period.

  • You borrow $150,000. The loan is structured as an amortized loan to repaid over 4 years...

    You borrow $150,000. The loan is structured as an amortized loan to repaid over 4 years with annual (end-of-period) payments of $41909.42 per year. The lender is charging you a rate of 4.6% APR. In the second year, how much interest is paid?

  • A 10-year loan of 2000 is to be repaid with payments at the end of each...

    A 10-year loan of 2000 is to be repaid with payments at the end of each year. It can be repaid under the following two options: (i) Equal annual payments at an annual effective interest rate of 5%. (ii) Installments of 200 each year plus interest on the unpaid balance at an annual effective interest rate of i. The sum of the payments under option (i) equals the sum of the payments under option (ii). Calculate i.

  • You took out a loan that must be repaid with level payments at the end of...

    You took out a loan that must be repaid with level payments at the end of each year. The loan has an annual effective rate of interest of 8%. The outstanding balance at the end of the ninth year was $22,000 and the outstanding balance at the end of the twelfth year was $15,000. What is your payment on the loan? Round your answers to two decimal places. 3914.6 X

  • A loan of $50,000 is made today. This loan will be repaid by a first smaller...

    A loan of $50,000 is made today. This loan will be repaid by a first smaller repayment, followed by 15 level repayments, i.e., there are 16 repayments in total. The first smaller repayment will occur exactly 3 years from today and each subsequent repayment (starting from the first level repayment) will occur exactly 1 year after the previous repayment. Explicitly, the final repayment will occur exactly 18 years from today. If the interest being charged on this loan is 4.8%...

  • Consdera $35.000 loan to be repaid in equal installments at the end of each of the...

    Consdera $35.000 loan to be repaid in equal installments at the end of each of the next years. The rest is a Set up an amortization schedule for the loan. Do not round intermediate calculations, Round your answers to the nearest cent. If netry is required, enter Repayment Interest Regayment of Principal Balance Total . How large must each annual payment be if the loan is for $70,0007 Assume that the interest rate remains round intermediate calculations. Round your answer...

  • I need this solved step by step and by hand. Please no Excel. Thank You! 1...

    I need this solved step by step and by hand. Please no Excel. Thank You! 1 7) (35 points) EmKay, Inc. is considering the purchase of new automated equipment to increase its production capacity. For this purchase, the following data apply: Purchase price = $450,000 (S250,000 from own funds (equity) and $200,000 from a loan) Equipment Life: 4 years Depreciation: MACRS-GDS 3-year property Estimated salvage: $90,000 Effective tax rate: 35% EOY Expected O&M Costs Estimated revenue $30,000 $180,000 2 $40,000...

  • EXCEL Question 1 (Home Loan) (3marks] Construct an EXCEL spreadsheet, which projects cash flows of a...

    EXCEL Question 1 (Home Loan) (3marks] Construct an EXCEL spreadsheet, which projects cash flows of a home loan with yearly loan repayments, ie. the loan is paid by payments at the end of each year for n years, until the loan is completely paid off. Please use your spreadsheet to answer the following questions: (a) Given loan amount is $600,000, annual effective interest rate i is 11%, loan term is 20 years. Find the annual repayment amount. (b) Given annual...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT