Assessment 2 Principles of Finance and Banking
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Assessment 2
Principles of Finance and Banking
Assignment
1. Coffee Café spent $7,500 to refurbish its current facility. The firm borrowed 80 percent of the refurbishment cost at 8.0% percent interest for 3 years and the loan calls forthree equal annual payments.
Prepare the amortization schedule for the three-year loan.
How much total interest is paid in 3 years? [40]
2. Ann would like to borrow $500,000 to buy a house, with payments to be made monthly.
She is deciding between two options: 30-year mortgage at 10% interest and 20-year mortgage at 9% interest.
a) Calculate the difference in payments on Ann’s 30-year mortgage at 10% interest versus a 20-year mortgage with 9% interest. [25]
b) What is the difference in total dollars that will be paid to the lender under each loan? [20]
c) What are the advantages and disadvantages of a 20-year loan compared to a 30- year loan? [15]
2026-04-01