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?

Guest Nov 26, 2018

#1**0 **

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

ElectricPavlov Nov 26, 2018