Question

1. A loan of Shs 4,000,000/= disbursed today is repaid in four installments commencing at the end of year one. The second repayment is at the end of year two and is half as much again as the first installment and is 20% less than the third installment (due at the end of year four). The final installment is due at the end of year five and is 15% more than the first installment.

The rate of interest is 13% per annum in years one and two; 15% per annum in years three and four; and 12% per annum in years, five and six. Compute the amount of each installment.?

     

Answer 1

Rate	Year	Installment	× discount factor	Present value
13%	2	Þ	0.7831	0.7831 Þ
15%	3	1.5Þ	0.6575	0.98625 Þ
15%	4	1.875 Þ	0.5718	1.072125 Þ
12%	5	1.15 Þ	0.5674	0.65251 Þ
				3.493985 Þ

3.493985 Þ = 4000,000

Þ = $1,444,824.61

Each installment is:

Year	Base	× weight	Installment
2	1,144,824.61	1.00	$ 1,144,824.61
3	1,144,824.61	1.50	$ 1,717,236.91
4	1,144,824.61	1.875	$ 2,146,546.14
5	1,144,824.61	1.15	$ 1,316,548.30

Please rate.