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?
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