In: Finance
Payments on a Jan. 1, 1995 40,000 loan are as follows:
1/1/96: 5,000
1/1/97: 5,000
1/1/98: 5,000
On July 1, 1998 an additional 10,000 is paid on the loan and no
more payments are made.
If d(4)=0.1 how much is owed on the loan on Jan. 1, 2005?
annual effective discount rate=1-(1-d/4)^4=1-(1-0.1/4)^4=9.6312%
annual effective interest rate=d/(1-d)=9.6312%/(1-9.6312%)=10.657674%
Amount owed on Jan 1,2005=40000*(1+10.657674%)^10-5000*(1+10.657674%)^9-5000*(1+10.657674%)^8-5000*(1+10.657674%)^7-10000*(1+10.657674%)^6.5=56968.2406