You have a loan outstanding. It requires making five annual payments of $2,000 each at the end of the next five years. Your bank has offered to allow you to skip making the next four payments in lieu of making one large payment at the end of the loan's term in five years. If the interest rate on the loan is 6%, what final payment will bank require you to make so that it is indifferent to the two forms of payment?

You have a loan outstanding. It requires making five annual payments of $2,000 each at the end of the next five years. Your bank has offered to allow you to skip making the next four payments in lieu of making one large payment at the end of the loan's term in five years. If the interest rate on the loan is 6%, what final payment will bank require you to make so that it is indifferent to the two forms of payment?

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications

Section: Chapter Questions

Problem 31P

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