Question

In: Finance

Leah currently owes $12,000 to a friend who is charging her interest of 2.60% p.m. She...

Leah currently owes $12,000 to a friend who is charging her interest of 2.60% p.m. She is required to settle the loan with two equal payments, one today and the other in four months. Calculate the size of the payments using four months as the focal date

Solutions

Expert Solution

loan = 12000

rate = 2.6% pm

let us assume the payments to be x

and present value of paymnets shall be equal to 12000

12000= x + x/(1+0.026(4))

12000 = 2.104x/1.104

x = 12000*1.104/2.104 = 6296.57

so size of each payment is 6296.57


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