Sam takes out a bank loan for $12750 that he will repay with 16 quarterly payments...

Sam takes out a bank loan for $12750 that he will repay with 16 quarterly payments at j1 = 6%. Sam has some financial troubles come up and is unable to pay the 7th and 8th payments. The bank allows Sam to skip these payments and then immediately after the 8th payment the loan is refinanced at j1 = 7%. What is the new quarterly payment?

Expert Solution

Calculate the quarterly payment as follows:

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Calculate the amortization table as follows:

Note:

Bank has skipped the 7th and 8th payments for the company and revised the loan for 7% by increasing interest rate and skipping the two installments. Loan quarterly payments will be recalculated from the 9th quarters opening balance and 8 payments remaining.

Formulas:

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Calculate the new quarterly payment as follows:

Therefore, the new quarterly payment is $912.11.

jeff jeffy answered 1 year ago

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