Please answer the following the following to answer questions 1-5: A $10,000 loa
ID: 1169955 • Letter: P
Question
Please answer the following
the following to answer questions 1-5: A $10,000 loan must be paid off in 5 years. The interest rate is 12%, compounded monthly 1. The amount of each monthly payment would be equal to A) $166.67 B) $185.33 C) $222.00 D) $192.91 2. The effective interest rate for this loan is A) B) C) D) 12% 13.12% 12.68% None of these 3. The total amount paid at the end of the 5 years A) $8,000 B) $8,430 C) $7,298 D) $13,320 4. The total interest paid on this debt is A) $2,000 B) $2,712 C) 1, 500 D) S3,320 5. Determine the net present worth (NPW) of the following cash flows using an interest rateo 790 ear ash 12,000 2,000 2,000 2.000 2.000 2,000 2.500 B,000 B. 00 low.$Explanation / Answer
Answer 1.
Amount borrowed = $10,000
Period = 5 years or 60 months
Annual Interest Rate = 12%
Monthly Interest rate = 1%
$10,000 = Monthly Payment * PVIFA(1%, 60)
$10,000 = Monthly Payment * (1 - (1/1.01)^60) / 0.01
$10,000 = Monthly Payment * 44.9550
Monthly Payment = $222.00
Answer 2.
Effective Interest Rate = (1 + Monthly Interest Rate)^12 - 1
Effective Interest Rate = (1 + 0.01)^12 - 1
Effective Interest Rate = 1.01^12 - 1
Effective Interest Rate = 1.1268 - 1
Effective Interest Rate = 0.1268
Effective Interest Rate = 12.68%
Answer 3.
Total Amount Paid = Monthly Payment * Period
Total Amount Paid = $222.00 * 60
Total Amount Paid = $13,320
Answer 4.
Total Interest Paid = Total Amount Paid - Amount borrowed
Total Interest Paid = $13,320 - $10,000
Total Interest Paid = $3,320