4? - 1 = 1.1255 - 1 =12.55%
k: Draw a time line, specify a time index, and solve problems involving the time value of money as applied to mortgages, credit card loans, and saving for college tuition or retirement.
Example:Paying off a Loan (or Mortgage)
A company wants to borrow $50,000 for five years. The bank will lend the money at a 9% rate of interest and will require that the loan be paid off in five equal, annual (end-of-year) installment payments. What are the annual loan payments that this company will have to make in order to pay off this loan?
N = 5, I/Y = 9, PV = 50,000; CPTPMT = $12,854.62
This loan can be paid off in five equal annual payments of $12,854.62.
Example:Loan Amortization
An individual borrows $10,000 at 10% today amortized over 5 years. What are his payments?
PV = 10,000, N = 5, I/Y = 10;CPTPMT = $2,637.97
He will pay $2,637.97 at the end of each of the ne