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anonymous
 5 years ago
AJ takes out a small business loan of 15500 dollars at a nominal rate of interest of 7.4 percent convertible quarterly. One year later, he repays 3500 dollars. Two years after that, the bank wants to sell AJ's loan to another institution. How much does AJ owe at that time?
anonymous
 5 years ago
AJ takes out a small business loan of 15500 dollars at a nominal rate of interest of 7.4 percent convertible quarterly. One year later, he repays 3500 dollars. Two years after that, the bank wants to sell AJ's loan to another institution. How much does AJ owe at that time?

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anonymous
 5 years ago
Best ResponseYou've already chosen the best response.0since it's convertible quarterly you use a compound interest formula using the rate/4. So the amount owed after one year (four quarters), will be: P (1 + r/4)^4 where P = the principal and r = .074

anonymous
 5 years ago
Best ResponseYou've already chosen the best response.0hi, thanks for helping me... i converted the interest as u said but im having trouble to set up the equation..

anonymous
 5 years ago
Best ResponseYou've already chosen the best response.0i have it as follows : 15500=3500+x(1.0185)^12 and im solving for x.

anonymous
 5 years ago
Best ResponseYou've already chosen the best response.0hmmm, well, you're looking for the total amount that is owed on the load after 3 years

anonymous
 5 years ago
Best ResponseYou've already chosen the best response.0after the first year, 15500*(1  .074/4)^4 is left on the loan

anonymous
 5 years ago
Best ResponseYou've already chosen the best response.0at that time, AJ pays 3500, and you have another equation

anonymous
 5 years ago
Best ResponseYou've already chosen the best response.0... with a new principal. two years after that time, the total amount on the load is: ((15500*(1.074/4)^4)  3500) * (1+ .074/4)^8 (since AJ now owes two more years  8 quarters  at the same rate but new principal)
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