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  • mgt201 Assingment

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    Hafsah badar
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    The document discusses the amortization of a loan over 8 installments. It provides details of the loan including an interest rate of 7.5% compounded annually, and installments paid on an ordinary annuity basis. It then shows the calculation of the installment amount using the ordinary annuity formula, determining the installment to be Rs. 85,363.12. Finally, it outlines an amortization schedule showing the decreasing interest and balance amounts and increasing principal amounts over the 8 installments.

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    The document discusses the amortization of a loan over 8 installments. It provides details of the loan including an interest rate of 7.5% compounded annually, and installments paid on an ordinary annuity basis. It then shows the calculation of the installment amount using the ordinary annuity formula, determining the installment to be Rs. 85,363.12. Finally, it outlines an amortization schedule showing the decreasing interest and balance amounts and increasing principal amounts over the 8 installments.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    Download as docx, pdf, or txt
    5 views2 pages

    mgt201 Assingment

    Uploaded by

    Hafsah badar
    The document discusses the amortization of a loan over 8 installments. It provides details of the loan including an interest rate of 7.5% compounded annually, and installments paid on an ordinary annuity basis. It then shows the calculation of the installment amount using the ordinary annuity formula, determining the installment to be Rs. 85,363.12. Finally, it outlines an amortization schedule showing the decreasing interest and balance amounts and increasing principal amounts over the 8 installments.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 2

    Lms id: bc210400581

    Name: Hafsah badar

    Financial Management-MGT201

    Question#01
    Solution:
    Loan amortization:
    It is a process of repaying over a period of time.
    No. of installments Interest rate No. of compounding Annuity type (Ordinary
    periods or due)
    8 7.5 8 Ordinary

    4 years are compounding period


    4x2=8
    Interest rate 15/2=7.5
    First of all, we should calculate the amount for installments
    Putting a formula for an ordinary annuity
    1−(1+ r) −n
    PV = R x [ ¿ ]
    r
    1−(1+ 0.075) −8
    500,000 = R x [ ¿ ]
    0.075
    1−( 1 .075 )
    500,000= R ( )
    0.075
    0.4393
    500,000= R ( 0.075 ¿

    500,00 x 5.85733
    R x 500,000/5.85733
    R= 85363.12
    Question#02
    Solution:
    No. of Installments Installment Amount Interest Amount Principal amount Balance
    0 0 0 0 500,00
    1 85363.12 37500 50863.12 44913683
    2 85363.12
    3 85363.12
    4 85363.12
    5 85363.12
    6 85363.12
    7 85363.12
    8 85363.12 0

    =500,00 x 0.075 = 3750


    = 85363-12
    = 37500

    Question#03
    Solution:
    Installment Amount Interest amount Principal amount Balance
    Constant Decreasing Increasing Decreasing

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