Question
In: Finance
A loan is to be repaid in end of quarter payments of $1,000 each, with there...
A loan is to be repaid in end of quarter payments of $1,000 each, with there being 20 end of quarter payments total. The interest rate for the first two years is 6% convertible quarterly, and the interest rate for the last three years is 8% convertible quarterly. Find the outstanding loan balance right after the 6th payment.
Solutions
Expert Solution
| Particulars | Amount | Present value |
| Last three year quarterly payment | $ 1,000.00 | |
| × present value annuity factor at the beginning of third year | 10.57534 | |
| Present value at beginning of third year | $ 10,575.34 | |
|
× present value factor [6%, 0.5 years] converted qtrly |
0.97066 | |
| Present value of last 12 payments | $ 10,265.08 | $ 10,265.08 |
| 7th and 8th payments | $ 1,000.00 | |
| × present value annuity factor at the beginning of 7th payment | 1.95588 | |
| Present value at beginning of 7th payment | $ 1,955.88 | |
|
× present value factor [6%, 1.5 years] converted qtrly |
1.00000 | |
| Present value of last 12 payments | $ 1,955.88 | $ 1,955.88 |
| Total present value |
$ 12,220.96 |
Answer is $12,220.96
jeff jeffy answered 1 year agoRelated Solutions
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