Under what circumstances would a firm be more likely to buy the required number of bonds
1 answer:
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Answer:
a) 12.23%
b) 12.94%
c) 14th month payment interest = $157.33
14th month principal = $369.50
d) 18th month payment interest = $142.04
18th month payment interest = $384.79
e) 22nd month payment interest = $126.12
22nd month payment interest = $400.71
Explanation:
price of truck = $15000
down payment = $1000
Loan amount = $14,000
assume monthly interest rate = r%
Loan amount after 1 year will be = 14000 * (1+r%)12
next we will determine the annuity factor = [ (1/r)-[(1/r)*(1/ (1+r)t)] ]
r = periodic interest rate , t = number of payments
monthly loan payment = $14000*(1+r%)12 / [ (1/r)-[(1/r)*(1/ (1+r)36)] ]
hence r = 1.019%
a) nominal interest rate
= 1.019% *12 = 12.23%
b) effective interest rate
= (1+1.019%)^12 -1 = 12.94%
attached below is the Amortization schedule
c) 14th month payment interest = $157.33
14th month principal = $369.50
d) 18th month payment interest = $142.04
18th month payment interest = $384.79
e) 22nd month payment interest = $126.12
22nd month payment interest = $400.71
