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# Monthly and Annual Payments

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1. What is the future value of a 5 year ordinary annuity with annual payments of \$200 evaluated at a 15% interest rate?

2. You have just taken out an instalment loan for \$100,000. Assume that the loan will be repaid in 12 equal monthly instalments of \$9,456 and the first monthly payment will be due one month from today. How much of the third monthly payment will go toward repayment of principal?

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What is the future value of a 5 year ordinary annuity with annual payments of \$200 evaluated at a 15% interest rate?

n = 5
r = 15.00%
FVIFA(5 periods, 15.% rate ) = 6.742381
FVIFA = Future Value Annuity Factor
Annuity = \$200.00
Therefore, future value = \$1,348.48 = 200 x 6.742381

You have just taken out an instalment loan for \$100,000. Assume that the loan will be repaid in 12 equal monthly instalments of \$9,456 and the first monthly payment will be due one month from today. How much of the third monthly payment will go toward repayment of principal?

We first need to calculate the interest rate
We will use EXCEL worksheet function RATE
Interest rate = 2.00% = RATE(12,-9456,100000)

Please view the attachment for the chart pertaining to this solution.

How much of the third monthly payment will go toward repayment of principal?