Two years ago, Paul borrowed $10000 from his sister Gerri to start a business. Paul agreed to pay Gerri interest for the loan at the rate of 4% /year, compounded monthly. Paul will now begin repaying the amount he owes by amortizing the loan (plus the interest that has accrued over the past 2 years) through monthly payments over the next 5 years at an interest rate of 3% /year compounded monthly. a) Find the size of the monthly payments Paul will be required to make. b) Find the outstanding principal at the end of 3 years. (Using formula)
Two years ago, Paul borrowed $10000 from his sister Gerri to start a business. Paul agreed to pay Gerri interest for the loan at the rate of 4% /year, compounded monthly. Paul will now begin repaying the amount he owes by amortizing the loan (plus the interest that has accrued over the past 2 years) through monthly payments over the next 5 years at an interest rate of 3% /year compounded monthly. a) Find the size of the monthly payments Paul will be required to make. b) Find the outstanding principal at the end of 3 years. (Using formula)
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 25PROB
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Two years ago, Paul borrowed $10000 from his sister Gerri to start a business. Paul agreed to pay Gerri interest for the loan at the rate of 4% /year, compounded monthly. Paul will now begin repaying the amount he owes by amortizing the loan (plus the interest that has accrued over the past 2 years) through monthly payments over the next 5 years at an interest rate of 3% /year compounded monthly. a) Find the size of the monthly payments Paul will be required to make. b) Find the outstanding principal at the end of 3 years. (Using formula)
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