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1. A demand loan of $8000.00 is prepaid by payment of $4000 after 2 years, $4000 after 4 years, and a final payment after 7 years. Interest is 6% compounded monthly for the first 2 years, 7% compounded annually for the next 2 years, and 7% compounded monthly thereafter. What is the size of the final payment?

 Apr 1, 2021
 #1
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First find the balance after 2 years

6% is .06 in decimal    per month interest is   .06/12 = .005

24 months

8000 ( 1 + .005)24 = 9017.28

    then pay 4000  resulting in NEW balance of 5017.28

 

Now you have this new balance for two years at 7% comp annual

   5017,28 ( 1 + .07)2 =  $5744.28

       pay 4000 dollars to bring balance down to  1744.28

 

Now 3 years at 7% compounded monthly

    1744.28 ( 1 + .07/12)36 = $  2150.57   final payment

 Apr 1, 2021

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