You owe your parents $28,000 (in present day dollars) and want to repay them in equal...

You owe your parents $28,000 (in present day dollars) and want to repay them in equal amounts the first to occur in 3 years from today and the other in 8 years from today. If the interest rate is 10.9% per annum compounding monthly, what will be the amount of each repayment?

Select one:

a. $24520

b. $38774

c. $66705

d. $38191

Solutions

Expert Solution

Given that,

Amount owe to parent = $28000

to equal installment of A are to be made for it at year 3 and year 8.

Interest rate r = 10.9% compounded monthly

So, using compounding formula, we get

28000 = A/(1+0.109/12)^(12*3) + A/(1+0.109/12)^(12*8)

=> 28000 = 1.17A

=> A = $24520

Option A is correct.

jeff jeffy answered 2 years ago

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