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Anthony received a loan of $8,000 at 4
Anthony received a loan of $8,000 at 4.52% compounded semi-annually from a credit union to use as working capital for his business. He had to make semi-annual payments for a period of 5 years to settle the loan.
a. Calculate the size of his payments.
b. What was the total interest paid during the period?
c. What was the interest portion of payment number 3?
Expert Solution
a. Computation of Semiannual Payment using PMT Function in Excel:
=pmt(rate,nper,-pv,fv)
Here,
PMT = Semiannual Payment = ?
Rate = 4.52%/2 = 2.26% compounded semiannually
Nper = 5 years * Periods = 10 Periods
PV = $8,000
FV = 0
Substituting the values in formula:
=pmt(2.26%,10,-8000,0)
PMT or Semiannual Payment = $902.77
b. Computation of Interest Paid during the Period:
Total Payment = $902.77*10 = $9,027.71
Interest Paid during the Period = $9,027.71 - $8,000 = $1,027.71
c. Computation of Interest Payment of Number 3:
Interest Payment of Number 3 is $147.80 The calculation is given as follows:
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