A $5000 loan at 10% compounded annually is to be repaid by two payments three and five years from the date of the loan. The first payment of $3000 will be applied to the balance owed after conversion of interest to principal at the end of the first three years. What would an investor pay for the loan contract 20 months after the date of the loan if she requires a rate of return of 9% compounded monthly?

A $5000 loan at 10% compounded annually is to be repaid by two payments three and five years from the date of the loan. The first payment of $3000 will be applied to the balance owed after conversion of interest to principal at the end of the first three years. What would an investor pay for the loan contract 20 months after the date of the loan if she requires a rate of return of 9% compounded monthly?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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