A community for students.
Here's the question you clicked on:
 0 viewing
chakaron13
 3 years ago
A loan of $4000 is to be repaid over a period of 8 years. During the first years, exactly half of the loan principal is to be repaid (along with accumulated compound interest) by a uniform series of payments A1 dollar per year. The other half of the loan principal is to be repaid over four years with accumulated interest by a uniform series of A2 dollar per year. If interest rate=9% per year what are A1 and A2?
chakaron13
 3 years ago
A loan of $4000 is to be repaid over a period of 8 years. During the first years, exactly half of the loan principal is to be repaid (along with accumulated compound interest) by a uniform series of payments A1 dollar per year. The other half of the loan principal is to be repaid over four years with accumulated interest by a uniform series of A2 dollar per year. If interest rate=9% per year what are A1 and A2?

This Question is Closed

vinrar
 3 years ago
Best ResponseYou've already chosen the best response.0since A1 is just half the total yearly payment (annuity) without any interest for first 4 years. Hence for 4 years total money to be repaid=2000$ , A1 is for 1 year so A1=2000/4=500$. interest for these 4 years = 4000$ * (1+0.09)^4  4000 =1646.32$ since 2000$ has been repaid, total amount to repay now = 2000$+1646.32$=3646.32$ This has to be paid in the form of uniform annuity, here comes the present value concept. The present value of annuity has to be determined for the annuities you are paying in 5th,6,7,8th years, that present value(pv) is equal to 3646.32$. pv= A2(1/ (1+0.09) + 1/ (1+0.09)^2+1/ (1+0.09)^3+1/ (1+0.09)^4)=3646.32$. A2* 3.23971 = 3646.32$ so A2 = 1125.50$ and we got A1=500$
Ask your own question
Sign UpFind more explanations on OpenStudy
Your question is ready. Sign up for free to start getting answers.
spraguer
(Moderator)
5
→ View Detailed Profile
is replying to Can someone tell me what button the professor is hitting...
23
 Teamwork 19 Teammate
 Problem Solving 19 Hero
 Engagement 19 Mad Hatter
 You have blocked this person.
 ✔ You're a fan Checking fan status...
Thanks for being so helpful in mathematics. If you are getting quality help, make sure you spread the word about OpenStudy.