Question

Question 4 0.5 pts Paisley Motors helped out a vendor by lending them money to upgrade their supply chain. Paisley is willing to give the vendor some time before repaying the loan. The vendor will start making payments of $44,273 at the end of year 9, decreasing the payment amount by 21% each subsequent year. The vendor will make a total of 6 payments (one at the end of each year) The company is thinking of selling the loan to a third party and needs to know how much the future loan payments are worth today. Use a nominal annual interest rate of 8%, compounded monthly to make the calculation Enter your answer as follows: 12345 Round your answer. Do not use a dollar sign ("$"), any commas (" or a decimal point ("")

Answer 1

i = 8%

Effective rate = (1+0.08/12)^12-1 = 8.3%

PW = 44273*[(1-0.21)^6 / (1+0.083)^6 - 1] / (-0.21-0.083)

= 44273*[(0.79)^6 / (1.083)^6 - 1] / (-0.293)

= 44273*2.89878

= 128337.68

PV = 128337.68*(P/F,8.3%,8) = 128337.68*0.528412 = 67815