You have a loan outstanding. It requires making nine annual payments of $8,000 each at the end of the next nine years. Your bank has offered to allow you to skip making the next eight payments in lieu of making one large payment at the end of the loan's term in nine years. If the interest rate on the loan is 9%, what final payment will the bank require you to make so that it is indifferent to the two forms of payment?

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
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You have a loan outstanding. It requires making nine annual payments of $8,000 each at the end of the next nine years.
Your bank has offered to allow you to skip making the next eight payments in lieu of making one large payment at the
end of the loan's term in nine years. If the interest rate on the loan is 9%, what final payment will the bank require you to
make so that it is indifferent to the two forms of payment?
Transcribed Image Text:You have a loan outstanding. It requires making nine annual payments of $8,000 each at the end of the next nine years. Your bank has offered to allow you to skip making the next eight payments in lieu of making one large payment at the end of the loan's term in nine years. If the interest rate on the loan is 9%, what final payment will the bank require you to make so that it is indifferent to the two forms of payment?
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