In: Finance
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
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.