Vincent took a loan of $8,200 from his parents to purchase equipment for his hair salon....

Vincent took a loan of $8,200 from his parents to purchase equipment for his hair salon. If they agreed on an interest rate of 6% compounded quarterly on the loan, what monthly payments will settle the loan in 5 years if he made his first payment 3 years and 6 months from now?

a)$194.16

b)$255.21

c)$158.42

d)$208.23

Expert Solution

Balance outstanding at the time of commencement of repayment, after 3 years and 6 months= $10,100.40 calculated as future value of loan amount as follows:

Since the first payment is made in 3 years and 6 months, payments are treated as made in advance (beginning of the month).

Interest rate of 6% compounded quarterly corresponds to yearly rate with monthly compounding of 5.970248% (monthly rate of 0.497521%) as follows:

Monthly payment required to amortize the loan balance = $194.16 as follows:

The answer is option a

jeff jeffy answered 1 year ago

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