A successful businessman is selling one of today for $2,489,200.00. However, his

Question

A successful businessman is selling one of today for $2,489,200.00. However, his friend is short on capital and would like to delay payment on the business. After negotiation, they agree to delay 3.00 years before the first payment. At that point, the friend will make quarterly payments for 11.00 years. The deal calls for a 5.88% APR "loan" rate with quarterly compounding. What quarterly payment will the friend make on the loan? lose friend. He is selling the Answer Format: Currency: Round to: 2 decimal places. Enter Answer Here... Submit Answer

Explanation / Answer

Cost of Business = $2,489,200

Annual Interest Rate = 5.88%
Quarterly Interest Rate = 1.47%

Period = 11 years or 44 quarters

First payment after 3 years and payments are made at the end of each quarter.

Let quarterly payment be $x

$2,489,200 = $x/1.0147^13 + $x/1.0147^14 + $x/1.0147^15 + $x/1.0147^16 + ... + $x/1.0147^56
$2,489,200 = $x * (1/1.0147^12) * (1 - (1/1.0147)^44) / 0.0147
$2,489,200 = $x * 27.05419
$x = $92,007.93

So, quarterly payment is $92,007.93

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