Homework Answers
I have calculated the present value factor for year 1-9 and ingnored the first three years as they are not relevant. The value of gradient is started from year 4, and present value is calculated by multiplying the gradient with the pvf and its sum is total present value.
The outstanding loan is $11,000
Total P.V of the gradient is 12.8525
The value of Z = 11000/12.8525 = $855.8619
Note: I have used the values of pvf calculated by Excel and have not rounded off so it must be correct but you should verify the values given in interest and annuity table.
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