SureWin Company owes an amount of debt to a bank and the bank proposed the following annual payments to pay off the debt. Year 0 (Today): 20,000 Year 1: 24,000; Year 2: 30,000; Year 3: 30,000; Year 4: 35,000; (1) If the appropriate interest rate that bank is charging is APR 6% annual compounding, what would be the amount to debt owed today? (2) If SureWin can negotiate with the bank to pay yearly equal instalments over 4 years starting from the end of year 1 with the same 6% annual interest rate, what would be the amount of yearly payment? (3) If the bank accepts SureWin proposal in (2), what would be the interest amount paid to the bank in the first year?
SureWin Company owes an amount of debt to a bank and the bank proposed the following annual payments to pay off the debt. Year 0 (Today): 20,000 Year 1: 24,000; Year 2: 30,000; Year 3: 30,000; Year 4: 35,000; (1) If the appropriate interest rate that bank is charging is APR 6% annual compounding, what would be the amount to debt owed today? (2) If SureWin can negotiate with the bank to pay yearly equal instalments over 4 years starting from the end of year 1 with the same 6% annual interest rate, what would be the amount of yearly payment? (3) If the bank accepts SureWin proposal in (2), what would be the interest amount paid to the bank in the first year?
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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SureWin Company owes an amount of debt to a bank and the bank proposed the following annual payments to pay off the debt.
Year 0 (Today): 20,000
Year 1: 24,000;
Year 2: 30,000;
Year 3: 30,000;
Year 4: 35,000;
(1) If the appropriate interest rate that bank is charging is APR 6% annual compounding, what would be the amount to debt owed today?
(2) If SureWin can negotiate with the bank to pay yearly equal instalments over 4 years starting from the end of year 1 with the same 6% annual interest rate, what would be the amount of yearly payment?
(3) If the bank accepts SureWin proposal in (2), what would be the interest amount paid to the bank in the first year?
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