Lina has borrowed $700,000 from the bank to begin a new business venture. The terms...
70.2K
Verified Solution
Link Copied!
Question
Finance
Lina has borrowed $700,000 from the bank to begin a new business venture. The terms of this ten (10) year loan are that payments will be made at the end of each quarter, with a stated interest rate of 4.35%. Based on her business plan and cash forecast, at the end of the second, third, and fourth year of operations Lina will make an extra payment on the loan in the amount of $25,000 in each of those years. This amount is over and above the regular quarterly payments.
a) What is the amount of the quarterly payment Lina must make to the bank? Do not consider the $25,000 lump sum payments in your calculations for this question. What is the balance of the loan after the 20th payment has been made?
b) Disregarding the additional lump sum payments of $25,000; if Lina decided to make monthly payments rather than quarterly payments, what would the monthly payment be. How much interest would Lina save if the loan payments were made monthly instead of quarterly?
c) How much interest will Lina save if both the quarterly payments as calculated in (a) and the three additional $25,000 payments are made?
d)What other factors should Lina consider before making the additional lump sum payments as described in the question?
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
