You have a loan outstanding. It requires making ninenine annual payments of $ 1

ID: 2810170 • Letter: Y

Question

You have a loan outstanding. It requires making

ninenine

annual payments of

$ 1 comma 000$1,000

each at the end of the next

ninenine

years. Your bank has offered to restructure the loan so that instead of making the

ninenine

payments as originally agreed, you will make only one final payment in

ninenine

years. If the interest rate on the loan is

5 %5%,

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

$nothing.

(Round to the nearest dollar.)

Future value of annuity = Annuity * [ ( 1 + r)n - 1] / r

Future value of annuity = 1,000 * [( 1 + 0.05)9 - 1] / 0.05

Future value of annuity = 1,000 * 11.026564

Future value of annuity = $11,026.56

Final payment will be $11,026.56

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