Question

3. Now repeat Problem 2 (in which you borrow $6500, make a total of 36 payments with the first payment made immediately, and all payments are growing by 2% per month) - but now use an interest rate of r = 0%. Then answer the following questions:

A) What is the size of the 6th (sixth) payment? (Hint: The answer is not $140.79.)

B) If you sum up all 36 payments (i.e. just simply add them up, as an accountant might do) - what is the sum of all 36 payments? Hint: This is a super easy question (and it's discussed in the book). In fact, there is NO NEED for any computation at all! NONE! Do you understand why? You need to. If you don't see the answer in about 3 seconds (at most), then you did not read the book carefully enough. Fix that.

Answer 1

See computation below [Final answers given at the end] (rounded up to 2 decimal places, in the absence of information):

Payment No.	Payment Amount (Previous cell x 1.02)	Growth
1	6,500.00
2	6,630.00	130.00
3	6,762.60	132.60
4	6,897.86	135.26
5	7,035.82	137.96
6	7,176.54	140.72
7	7,320.08	143.54
8	7,466.49	146.41
9	7,615.82	149.33
10	7,768.14	152.32
11	7,923.51	155.37
12	8,081.99	158.48
13	8,243.63	161.64
14	8,408.51	164.88
15	8,576.69	168.18
16	8,748.23	171.54
17	8,923.20	174.97
18	9,101.67	178.47
19	9,283.71	182.04
20	9,469.39	185.68
21	9,658.78	189.39
22	9,851.96	193.18
23	10,049.00	197.04
24	10,249.98	200.98
25	10,454.98	205.00
26	10,664.08	209.10
27	10,877.37	213.29
28	11,094.92	217.55
29	11,316.82	221.90
30	11,543.16	226.34
31	11,774.03	230.87
32	12,009.52	235.49
33	12,249.72	240.20
34	12,494.72	245.00
35	12,744.62	249.90
36	12,999.52	254.90
TOTAL	337,967.06

A) $ 7176.54
B) $ 337967.06

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