If your aunt borrows $64,000 from the bank at 10 percent interest over the eight
ID: 2688852 • Letter: I
Question
If your aunt borrows $64,000 from the bank at 10 percent interest over the eight-year life of the loan. Use Appendix D. (a) What equal annual payments must be made to discharge the loan, plus pay the bank its required rate of interest? (Round "PV Factor" to 3 decimal places and final answer to 2 decimal places. Omit the "$" sign in your response.) Annual payments $ (b) How much of her first payment will be applied to interest? To principal? (Round your answers to 2 decimal places. Omit the "$" sign in your response.) First payment Interest $ Principal $ (c) How much of her second payment will be applied to each? (Round your answers to 2 decimal places. Omit the "$" sign in your response.) Second payment Interest $ Principal $Explanation / Answer
A=PVa /PVifa(10%, 8 periods)
=64000/4.868=13147.0
First payment:
$64,000 × .10 = $6,400 interest
$13147.0– $6,400 = $6747applied to principal