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bija089 [108]
3 years ago
15

Bill just financed a used car through his credit union. His loan requires payments of $275 a month for five years. Assuming that

all payments are paid on time, his last payment will pay off the loan in full. What type of loan does Bill have?
a. Amortized
b. Complex
c. Pure discount
d. Lump sum
e. Interest-only
Business
1 answer:
Fittoniya [83]3 years ago
3 0

Answer:

A. amortized

Explanation:

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Answer:

FCF_0=1.05

So option (b) is correct option

Explanation:

We have given value of operation PV = $25.00

WACC, that is Ke = 11.50% = 0.1150

It is grow at a constant rat of 7 % so g = 0.07

We have to find the value of FCF_0

We know that value of operation is given by

PV=\frac{FCF_0(1+g)}{Ke-g}

So 25=\frac{FCF_0(1+0.07)}{0.1150-0.07}

FCF_0=1.05

So option (b) is correct option

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