You want to borrow $10,000 from a local bank, which is to berepaid in 2 equal semiannual
installments. The loan officer initially offered an interest rateof 12% compounded monthly.
However, you were able to negotiate that interest be compoundedsemiannually instead of
monthly. With this negotiation, how much do you save in totalinterest payments over the loan
life?
You want to borrow $10,000 from a local bank, which is to berepaid in 2 equal semiannual
installments. The loan officer initially offered an interest rateof 12% compounded monthly.
However, you were able to negotiate that interest be compoundedsemiannually instead of
monthly. With this negotiation, how much do you save in totalinterest payments over the loan
life?
Related questions
1. On the day you entered college, you borrowed $30,000 from your local bank. The terms of the loan include an interest rate of 4.75 percent. The terms stipulate that the principal is due in full one year after you graduate. Interest is to be paid annually at the end of each year. Assume that you complete college in four years. How much total interest will you pay on this loan assuming you paid as agreed? (Hint: This is simple interest, not an amortized loan)
| $7,267 |
| $7,400 |
| $7,125 |
| $1,500 |
| $1,425 |
2. Mr. Miser loans money at an annual percentage rate of 18 percent. Interest is compounded daily. What is the effective rate Mr. Miser is charging on his loans?
3. You just acquired a 30-year mortgage in the amount of $179,500 at 4.75 percent interest, compounded monthly. Payments will be equal over the life of the loan with the first payment due one month after the date of the loan. How much of the first payment will be interest?
4.The Great Giant Corp. has a management contract with its newly hired president. The contract requires a lump sum payment of $24,500,000 be paid to the president upon the completion of her first 6 years of service. The company wants to set aside an equal amount of funds each year to cover this anticipated cash outflow. The company can earn 5 percent on these funds. How much must the company set aside each year for this purpose?
