)P 4-10 (similar to) -Question Help * You have a loan outstanding. It requires m

Question

)P 4-10 (similar to) -Question Help * You have a loan outstanding. It requires making nine annual payments of $6,000 each at the end of the next nine years. Your bank has offered to restructure the loan so that instead of making the nine payments as originally agreed, you will make only one final payment in nine years. If the interest rate on the loan is 2%, what final payment will the bank require you to make so that it is indifferent to the two forms of payment? The final payment the bank will require you to make is S (Round to the nearest dollar)

Explanation / Answer

Final payment to bank P×[(1+r)^n-1]÷r Here, 1 Interest rate per annum 2.00% 2 Number of years                                            8 3 Number of payments per per annum                                            1 1÷3 Interest rate per period ( r) 2.00% 2×3 Number of periods (n) 8 Payment per period (P) $                                6,000 Final payment to bank $                             51,498 6000*((1+2%)^8-1)/2%

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