Cal Lury owes $26,000 now. A lender will carry the debt for five more years at 6
ID: 2742131 • Letter: C
Question
Cal Lury owes $26,000 now. A lender will carry the debt for five more years at 6 percent interest. That is, in this particular case, the amount owed will go up by 6 percent per year for five years. The lender then will require that Cal pay off the loan over the next 13 years at 9 percent interest.
What will his annual payment be? Use Appendix A and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
What will his annual payment be? Use Appendix A and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Explanation / Answer
value of debt at end of 5 eyars
= 26000 * (1 + 6%)^5
= 34793.87
let x be the annual payments
=>
x * [1 - (1 + 9%)^-13]/9% = 34793.87
=>
x = 4647.30