Question

Exercise: · A borrows $10.000 from B and agrees to repay it with equal quarterly installment of principle and interest at 8%. convertible quarterly over six years, At the end of two years B sells the right to receive future payments to Cat a price, which produces a yield rate of 10% convertible quarterly for C Find the total amount of interest received: (1) by C. and (2) by

Answer 1

Loan Amount(PV)	10000
Tenure of loan	6 years
number of payment(NPER)	6*4=24
Interest rate(annual)	8%
effective Interest rate(quaterly-r)	8/4=2%
Quarterly Payment	$528.71	PMT(2%,24,-10000)

as per the given situation in  question , B will transfer the interest right to C after 2 years

=> this will not change the interest payment or loan installment by A , but the yield of loan increased by discount in remaining principle value.

Amortization table for the loan :

Repayment Number	Opening Balance	Loan Repayment	Interest Charged	total interest received	Capital Repaid	Closing Balance
1	$10,000.00	$528.71	$200.00		$328.71	$9,671.29
2	$9,671.29	$528.71	$193.43		$335.29	$9,336.00
3	$9,336.00	$528.71	$186.72		$341.99	$8,994.01
4	$8,994.01	$528.71	$179.88		$348.83	$8,645.18
5	$8,645.18	$528.71	$172.90		$355.81	$8,289.37
6	$8,289.37	$528.71	$165.79		$362.92	$7,926.45
7	$7,926.45	$528.71	$158.53		$370.18	$7,556.27
8	$7,556.27	$528.71	$151.13	$1,408.37	$377.59	$7,178.68
9	$7,178.68	$528.71	$143.57		$385.14	$6,793.55
10	$6,793.55	$528.71	$135.87		$392.84	$6,400.71
11	$6,400.71	$528.71	$128.01		$400.70	$6,000.01
12	$6,000.01	$528.71	$120.00		$408.71	$5,591.30
13	$5,591.30	$528.71	$111.83		$416.88	$5,174.41
14	$5,174.41	$528.71	$103.49		$425.22	$4,749.19
15	$4,749.19	$528.71	$94.98		$433.73	$4,315.46
16	$4,315.46	$528.71	$86.31		$442.40	$3,873.06
17	$3,873.06	$528.71	$77.46		$451.25	$3,421.81
18	$3,421.81	$528.71	$68.44		$460.27	$2,961.54
19	$2,961.54	$528.71	$59.23		$469.48	$2,492.06
20	$2,492.06	$528.71	$49.84		$478.87	$2,013.19
21	$2,013.19	$528.71	$40.26		$488.45	$1,524.74
22	$1,524.74	$528.71	$30.49		$498.22	$1,026.52
23	$1,026.52	$528.71	$20.53		$508.18	$518.34
24	$518.34	$528.71	$10.37	$1,280.69	$518.34	$0.00

Interest received by B : $1,408.37

Interest received by C : $1,280.69