+598 Mike borrowed $ 14 000 at 6.5% compounded semi- annually. If the loan is to be repaid in equal semi- annual payments over three years and the first payment is due four years after the date of the loan, what is the size of the semi- annual payment?
Any help with steps would be greatly appreciated. Thanks
-3 DO YOUR OWN WORK. DON'T RELY ON OTHER PEOPLE. THEY COULD GIVE YOU FAKE ANSWERS.
Mike borrowed $ 14 000 at 6.5% compounded semi- annually. If the loan is to be repaid in equal semi- annual payments over three years and the first payment is due four years after the date of the loan, what is the size of the semi- annual payment?
Any help with steps would be greatly appreciated. Thanks
In this problem, Mike's loan of $14,000 is not due for another 4 years.So, we have to find how much has this loan grown in 4 years, or its FV, which comes to $18,082.09. Now, this loan is going to be repaid over a period of 3 years. As a result, his payments are going to be $3,365.62 each, in order to pay off the entire loan. The formulae used to calculate this are as follows:
FV=PV[1 + R]^N=FV OF $1 TODAY. Then the 2nd formula to find his loan payments is:
PMT=PV. R.{[1 + R]^N/ [1 + R]^N - 1}=PMT NEEDED TO PAY OFF A LOAN OF $18,082.09,
Where R=Interest rate per period, N=number of periods,
PV=Present value, FV=Future value.
