Charles must make a loan payment of $1,739 at the end of each quarter. His nominal...

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Question

Charles must make a loan payment of $1,739 at the end of each quarter. His nominal annual loan rate is 3%, compounded quarter

Answer 1

Answer #1

Payment at each quarter = 1739

Nominal Interest Rate = 3% compounded quarterly

Therefore, quarterly interest = 3% / 4 = 0.75% or 0.0075

Repayment period = 11 years

Total repayment time will be 11*4 = 44 quarters

Calculate how much Charles originally borrowed.

Calculate the Present Worth of the loan payments

PW = A [1 - (1 + i) ^-N / i]

PW = 1739 [1 - (1 + 0.0075) ^-44 / 0.0075]

PW = 1739 (37.358730)

PW = 64966.83 or take 64967

The loan originally borrowed is 64967

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Answer 2

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