Question

Number of payments. Tony is offering two repayment plans to Phil for a long overdue loan. Offer 1 is to receive a visit from

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Loan Amount = PV = $15,000

Annual Payment = P = $3,900

r = interest rate = 20%

Let n = number of years

Annual payment can be calculated using the below formula

Annual payment = [r* PV] / [1 - (1+r)^-n]

$3,900 = [20% * $15,000] / [1 - (1+20%)^-n]

$3,900 = $3,000 / [1 - (1.20)^-n]

1 - (1.20)^-n = 0.7692307692

(1.20)^-n = 0.230769231

(1.20)^n = 4.3333333333

n = 8.04258747404

It will take 8.04 years to pay off the loan if he takes offer 2

Add a comment
Know the answer?
Add Answer to:
Number of payments. Tony is offering two repayment plans to Phil for a long overdue loan....
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Number of payments. Tony is offering two repayment plans to Phil for a long overdue loan....

    Number of payments. Tony is offering two repayment plans to Phil for a long overdue loan. Offer 1 is to receive a visit from an enforcer and the debt is due in full at once. Offer 2 is to pay back $4,000 at the end of the year at an interest rate of 17% until Phil pays off the loan pnncipal How long will it take for Phil to pay off the loan if he takes offer 2? years (Round...

  • ​(Annuity number of​ periods)  How long will it take to pay off a loan of ​$54,000...

    ​(Annuity number of​ periods)  How long will it take to pay off a loan of ​$54,000 at an annual rate of 11 percent compounded monthly if you make monthly payments of $500​? Use five decimal places for the monthly percentage rate in your calculations. The number of years it takes to pay off the loan is ___ years.  ​(Round to one decimal​ place.)

  • 2. Ned pays $150 per month on a credit card loan of $10,000, with interest of...

    2. Ned pays $150 per month on a credit card loan of $10,000, with interest of 24% com- pounded monthly (so 2% per month). Let pn be the amount he owes on the card after n months. (a) Give a recurrence relation for Pn (b) Solve this recurrence relation. (c) After how many months, if ever, will Ned pay off the debt? (d) Changing the payment, what is the maximum payment that Ned can make and never pay off the...

  • When the loan is first obtained, $300,000 will be posted in the long- term debt account...

    When the loan is first obtained, $300,000 will be posted in the long- term debt account and will appear on the balance sheet. At the end of the first year, Sunnyvale will pay the bank a total of $130,000, consisting of $30,000 interest on the loan and $100,000 repayment on the principal portion of the loan. The $30,000 interest expense, which is paid to the bank for the use of its money, appears as an expense on the income statement....

  • Tony and Suzie graduate from college in May 2021 and begin developing their new business. They begin by offering clinics...

    Tony and Suzie graduate from college in May 2021 and begin developing their new business. They begin by offering clinics for basic outdoor activities such as mountain biking or kayaking. Upon developing a customer base, they’ll hold their first adventure races. These races will involve four-person teams that race from one checkpoint to the next using a combination of kayaking, mountain biking, orienteering, and trail running. In the long run, they plan to sell outdoor gear and develop a ropes...

  • • 1) A new car is purchased and a $20,000 loan is taken. The loan is...

    • 1) A new car is purchased and a $20,000 loan is taken. The loan is for 5 years (60 months) and the interest rate is 7.9% compounded monthly. What is the monthly payment? • 2)A new car is purchased and a $20,000 loan is taken. The loan is for 5 years (60 months) and the interest rate is 7.9% compounded monthly. What is the balance after 3 years? . 3) A new car is purchased and a $30,000 loan...

  • The number of compounding periods in one year is called compounding frequency. The compounding frequency affects...

    The number of compounding periods in one year is called compounding frequency. The compounding frequency affects both the present and future values of cash flows. An Investor can Invest money with a particular bank and eam a stated interest rate of 6.60%; however, interest will be compounded quarterly. What are the nominal, periodic, and effective interest rates for this investment opportunity? Interest Rates Nominal rate Periodic rate Effective annual rate L Rahul needs a loan and is speaking to several...

  • i) He owes $80,000 for his house which he believes is worth $150,000 ii) His car...

    i) He owes $80,000 for his house which he believes is worth $150,000 ii) His car is worth $20,000 against which there there is $2,000 on the remaining bank loan. iii) his stock protfolio has risen to $50,000 iv) he has a $10,000 bank balance in his bank account which is earning him 1.2% annual interest rate v) and the value of this belonging is $45,000. he has just received his monthly paycheck for $6,000 and he is trying to...

  • An investor can invest money with a particular bank and eam a stated interest rate of...

    An investor can invest money with a particular bank and eam a stated interest rate of 15.40%; however, interest w be compounded quarterly. What are the nominal, periodic, and effective interest rates for this investment opportunity? Interest Rates Nominal rate Periodic rate Effective annual rate Rahul needs a loan and is speaking to several lending agencies about the interest rates they would charge and the terms they offer. He particularly likes his local bank because he is being offered a...

  • Argue both sides to this case Bill runs a dry cleaning store called Bill’s Dry Cleaning. He is in...

    Argue both sides to this case Bill runs a dry cleaning store called Bill’s Dry Cleaning. He is in deep financial trouble. His bank will no longer give him any credit and is threatening to demand immediate repayment of all money it has loaned to his business. Bill also owes money to other creditors and vendors. Bill is desperate, so he approaches Christine, a very rich lady, and asks her to refinance his business. Christine reviews the business and its...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT