Messineo LLC borrowed $15,000 at a 14% annual rate of interest to be repaid over 3 years. The loan is amortized into three equal annual end of year payments. As the CFO of Messineo, LLC you must prepare a report of the pertinent information in a short summary for the CEO.
Calculate the annual end of year loan payment amount.
Prepare a loan amortization schedule showing the interest and principal break down of each of the three loan payments.
Prepare a one page executive summary for the CEO, Linda Messineo,with the loan payment schedule explaining why the interest portion of each payment declines with the passage of time.
Also, be sure to remind her that the interest portion of the loan payment is tax deductible. You should include your spreadsheet as an appendix to your executive summary to prove your figures in the loan payment schedule.
Hint: Using a spreadsheet, you will start with the PMT function to calculate the annual payment. Next you will use the IPMT function to find the interest portion for each of the three years.
Messineo LLC borrowed $15,000 at a 14% annual rate of interest to be repaid over 3 years. The loan is amortized into three equal annual end of year payments. As the CFO of Messineo, LLC you must prepare a report of the pertinent information in a short summary for the CEO.
Calculate the annual end of year loan payment amount.
Prepare a loan amortization schedule showing the interest and principal break down of each of the three loan payments.
Prepare a one page executive summary for the CEO, Linda Messineo,with the loan payment schedule explaining why the interest portion of each payment declines with the passage of time.
Also, be sure to remind her that the interest portion of the loan payment is tax deductible. You should include your spreadsheet as an appendix to your executive summary to prove your figures in the loan payment schedule.
Hint: Using a spreadsheet, you will start with the PMT function to calculate the annual payment. Next you will use the IPMT function to find the interest portion for each of the three years.
Related questions
1. On the day you entered college, you borrowed $30,000 from your local bank. The terms of the loan include an interest rate of 4.75 percent. The terms stipulate that the principal is due in full one year after you graduate. Interest is to be paid annually at the end of each year. Assume that you complete college in four years. How much total interest will you pay on this loan assuming you paid as agreed? (Hint: This is simple interest, not an amortized loan)
| $7,267 |
| $7,400 |
| $7,125 |
| $1,500 |
| $1,425 |
2. Mr. Miser loans money at an annual percentage rate of 18 percent. Interest is compounded daily. What is the effective rate Mr. Miser is charging on his loans?
3. You just acquired a 30-year mortgage in the amount of $179,500 at 4.75 percent interest, compounded monthly. Payments will be equal over the life of the loan with the first payment due one month after the date of the loan. How much of the first payment will be interest?
4.The Great Giant Corp. has a management contract with its newly hired president. The contract requires a lump sum payment of $24,500,000 be paid to the president upon the completion of her first 6 years of service. The company wants to set aside an equal amount of funds each year to cover this anticipated cash outflow. The company can earn 5 percent on these funds. How much must the company set aside each year for this purpose?
