Cal Lury owes $27,000 now. A lender will carry the debt for six more years at...

Cal Lury owes $27,000 now. A lender will carry the debt for six more years at 7 percent interest. That is, in this particular case, the amount owed will go up by 7 percent per year for six years. The lender then will require that Cal pay off the loan over the next 14 years at 10 percent interest.

What will his annual payment be? Use Appendix A and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Annual payments

$

Expert Solution

	Each annual payment (P)	PVA÷([1-(1÷(1+r)^n)]÷r)

	Here,

1	Interest rate per annum	10.00%
2	Number of years	14
3	Number of compoundings per per annum	1
1÷3	Interest rate per period ( r)	10.00%
2×3	Number of periods (n)	14
	Present value (PVA)	$ 40,520	27000*(1+7%)^6

	Each annual payment (P)	$ 5,500.40
		40520/((1-(1/(1+10%)^14))/10%)

jeff jeffy answered 1 year ago

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