a person borrows Rs 80000 at 12% per annum. the principal and interest are to be paid in 11 monthly installments doubling each installment from its previous installment. calculate amount of first and last payment.
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Thus the total amount during 6 years is $ 935.41
Explanation:
A loan is created with 10 annual equal payments of $500 at an effective annual rate of 6%. However, after 4 years, the borrower needs an additional $2000 and must restructure all outstanding debts over the remaining 6 years at 7% effective. What is the payment amount during those 6 years?
Solution:
At 4 years the outstanding loan balance is 500 a 6|.06
The refinanced loan with payments of x dollars will have 6 payments
and a present value at its beginning of
500 a 6|.06 + 2000 = x a 6|.07.
Therefore
x = 500 a 6|.06 + 2000 / a 6|.07
= $935.41.
Thus the total amount during 6 years is $ 935.41
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