Question

A demand loan of $8000.00 is repaid by payments of $4000.00 after two years, $4000.00 after four years, and a final payment after seven years. Interest is 9% compounded monthly for the first two years, 10% compounded quarterly for the next two years, and 10% compounded semi-annually thereafter. What is the size of the final payment? The final payment is $ . (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.).

Answer 1

Final payment=3736.32

Original amount= 8000. Future value=Present value*(1+Rate)^number of periods

Amount due after 2 years = 8000*(1+9%/12)^(2*12)= 9571.31

Amount paid= 4000

Balance due= 5571.308

Amount due after 4 years = 5571.308*(1+10%/4)^(2*4)= 6788.098

Amount paid= 4000

balance due=2788.098

Amount due after seven years= 2788.098*(1+10%/2)^(3*2) = 3736.318