A small business owner visits her bank to ask for a loan. The owner states that
ID: 2654066 • Letter: A
Question
A small business owner visits her bank to ask for a loan. The owner states that she can repay a loan at $1,400 per month for the next three years and then $2,800 per month for two years after that. If the bank is charging customers 8.50 percent APR, how much would it be willing to lend the business owner?
You are looking to buy a car. You can afford $470 in monthly payments for four years. In addition to the loan, you can make a $1,200 down payment. If interest rates are 7.50 percent APR, what price of car can you afford?
What annual interest rate would you need to earn if you wanted a $1,000 per month contribution to grow to $83,500 in six years?
You wish to buy a $9,000 dining room set. The furniture store offers you a 3-year loan with an 10 percent APR. What are the monthly payments?How would the payment differ if you paid interest only?
A small business owner visits her bank to ask for a loan. The owner states that she can repay a loan at $1,400 per month for the next three years and then $2,800 per month for two years after that. If the bank is charging customers 8.50 percent APR, how much would it be willing to lend the business owner?
You are looking to buy a car. You can afford $470 in monthly payments for four years. In addition to the loan, you can make a $1,200 down payment. If interest rates are 7.50 percent APR, what price of car can you afford?
Explanation / Answer
A small business owner visits her bank to ask for a loan. The owner states that she can repay a loan at $1,400 per month for the next three years and then $2,800 per month for two years after that. If the bank is charging customers 8.50 percent APR, how much would it be willing to lend the business owner?
Amount Payable after 3 year = pv(rate,nper,pv,fv)
rate =8.50%/12
nper = 2 year * 12 = 24
pmt (monthly payment) = 2800
fv = 0
Amount Payable after 3 year = pv(8.5%/12,24,2800,0)
Amount Payable after 3 year = $ 61,598.47
Loan amount = pv(rate,nper,pmt,fv)
rate = 8.5%/12
nper = 3*12 = 36
pmt = 1400
fv (Amount payable after 3 year) = $ 61,598.47
Loan amount = pv(8.5%/12,36,1400,61598.47)
Loan amount =$ 92,125.95
Answer
$ 92,125.95 would it be willing to lend the business owner
You are looking to buy a car. You can afford $470 in monthly payments for four years. In addition to the loan, you can make a $1,200 down payment. If interest rates are 7.50 percent APR, what price of car can you afford?
Loan amount = pv(rate,nper,pmt,fv)
rate = 7.5%/12
nper = 4*12 = 48
pmt = 470
fv = 0
Loan amount = pv(7.5%/12,48,470,0)
Loan amount =$ 19,438.43
Price of car can you afford = Down payment + Loan amount
Price of car can you afford = 1200 + 19438.43
Price of car can you afford = $ 20,638.43
What annual interest rate would you need to earn if you wanted a $1,000 per month contribution to grow to $83,500 in six years?
Annual interest Rate = rate(nper,pmt,pv,fv)*12
nper = 6*12 = 72
pmt = 1000
pv = 0
fv = 83500
Annual interest Rate = rate(72,1000,0,-83500)*12
Annual interest Rate = 4.90%
You wish to buy a $9,000 dining room set. The furniture store offers you a 3-year loan with an 10 percent APR. What are the monthly payments?How would the payment differ if you paid interest only?
Monthly payments = pmt(rate,nper,pv,fv)
rate = 10%/12
nper = 3*12 = 36
pv = 9000
fv= 0
Monthly payments = pmt(10%/12,36,-9000,0)
Monthly payments = $ 290.40
If Only Monthly Interest Payment , than Payment = 9000*10%*1/12 = $ 75
Difference in payment = 290.40-75
Difference in payment = $ 215.40