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A loan of $800,000 will be paid by a cash payment of $400,000 now, $120,000 at the end of 4 years, $80,000 at the end of 6 years, and the last payment at the end of 7 years. If money is worth 4% compounded annually, then what is the value of the last payment?

 Nov 26, 2018
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800000 - 400000 = 400000 left after cash payment

 

400, 000 (1+.04)^4 = 467943.42 at the end of 4 years

 

467943.42 - 120,000 = 347943.42 ('new' loan amount)

 

347943.42 (1+.04)^2 = 376335.60   at year end 6

   - 80 000 payment = 296335.60

 

296335.60 x (1.04)^1 = final payment = $ 308,189.03

 Nov 26, 2018

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