5) A loan is being repaid by 2n level payments (with the first payment 1 period after the start of the loan) at an...

Question

Question

Answer 1

Answer #1

Part (a)

It's an advance finance. Symbols have their usual meanings as stated in the text books.

a_n = (3/4)a_2n = (3/4)a_n(1 + v_jⁿ)

Hence, 1 + v_jⁿ = 4/3

Hence, v_jⁿ = 4/3 - 1 = 1/3

Part (b)

Principal portion in the (n + 1)th payment = v_j^{2n - (n + 1) + 1} = v_jⁿ = 1/3

Hence interest portion = 1 - 1/3 = 2/3

Hence, I_n+1 / PR_n+1 = (2/3) / (1/3) = 2

Answer 2

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