Equal end of year payments of $263.80 each are being made on a $1,000 loan at 10% per year compounded monthly. Immediately after the third payment, what lump sum amount would completely pay off the loan?

Equal end of year payments of $263.80 each are being made on a $1,000 loan at 10% per year compounded monthly. Immediately after the third payment, what lump sum amount would completely pay off the loan?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.17: Amortized Loans

Problem 1ST

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Concept explainers

Amortized Loans

The term "amortization" refers to spreading the value of a loan or a debt over a series of regular payments or installments comprising of both the principal and interest amount. It generally involves the process where in the value of a loan or an intangible asset is written down over its maturity period.

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Equal end of year payments of $263.80 each are being made on a $1,000 loan at 10% per year compounded monthly.
Immediately after the third payment, what lump sum amount would completely pay off the loan?

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