Parker-Miller Health Care Systems borrows $200,000 from Ashesprings National Ban
ID: 2760130 • Letter: P
Question
Parker-Miller Health Care Systems borrows $200,000 from Ashesprings National Bank to finance a new piece of ultrasound equipment. PMHC has agreed, according to the terms of the loan, to make 5 equal installment payments at the end of each of the next 5 years. Ashesprings National Bank is to receive 7.5% interest on the loan balance outstanding at the beginning of each year. Calculation of the payment shows that:
7.50% Rate
5 Nper
200000 PV
($49,432.94)=PMT
a. What would the payment to principle amount for PMHC be in year 2?
b. What would PMHC pay in interest in year 5?
c. What would the remaining balance be on the loan in year 3?
d.What is the total amount of interest PMHC would pay over the course of the loan?
Explanation / Answer
Answer a. 37015.41
Answer b. 3448.81
Answer c. 128551.65 (at start of year 3)
Answer d. 47164.70
Year
Opening balance of principal
interest @ 7.5%
EMI
Principal in EMI
1
2,00,000.00
15,000.00
49,432.94
34,432.94
2
1,65,567.06
12,417.53
49,432.94
37,015.41
3
1,28,551.65
9,641.37
49,432.94
39,791.57
4
88,760.08
6,657.01
49,432.94
42,775.93
5
45,984.15
3,448.81
49,432.94
45,984.13
6
0.0
47,164.72
Year
Opening balance of principal
interest @ 7.5%
EMI
Principal in EMI
1
2,00,000.00
15,000.00
49,432.94
34,432.94
2
1,65,567.06
12,417.53
49,432.94
37,015.41
3
1,28,551.65
9,641.37
49,432.94
39,791.57
4
88,760.08
6,657.01
49,432.94
42,775.93
5
45,984.15
3,448.81
49,432.94
45,984.13
6
0.0
47,164.72