Question

The Dell Corporation borrowed â$ at â% interest perâ year, which must be repaid in equal EOY amountsâ (including both interest andâ principal) over the next years. How much must Dell repay at the end of eachâ year? How much of the total amount repaid isâ interest?

Answer 1

Answer:

A. $2,098,000 per year

B. $2,588,000

Explanation:

A. Calculation for How much must Dell repay at the end of each year

First step is to calculate (A/P, 7%, 6 )which will give us (0.2098)

Now let Calculate the amount to repay

Amount to repay= $10,000,000 (A/P, 7%, 6)

Amount to repay= $10,000,000 (0.2098)

Amount to repay = $2,098,000 per year

Therefore the amount that Dell will repay at the end of each year will be $2,098,000 per year

2. Calculation for How much of the total amount repaid is interest

Total interest repaid = ($2,098,000*6 years)− $10,000,000

Total interest repaid=$12,588,000-$10,000,000

Total interest repaid= $2,588,000

Therefore the total amount repaid interest will be $2,588,000