Posted by jule on Thursday, August 9, 2012 at 6:13pm.
john has a loan but doesn't begin to repay his loan for 11 months, at a rate of $500 every month of four month. the interest rate is 8% compounded monthly determin the size of the loan using the following 2 steps
1. calculate the present value, pv1 of annuity payment at the end of the period of deferral
2. calculate the present value, pv2 of the payment at the beginning of the period of deferral

math  Reiny, Thursday, August 9, 2012 at 8:35pm
Make a timeline graph, marking months beginning at 0 (now), 1, 2, 3, ...
The way I interpret your question, the first payment will be at month 11 , then payments at 12, 13 and 14
Since the formula for an ordinary annuity assumes the first payment at the end of the first interest period, we would be finding PV1 at month 10
PV1 = 500(1  1.006666...^4)/.0066666..
= 1967.106
2. now we have to "move back" this amount to the present time (now or time spot of 0)
PV2 = 1967.106(1.0066666...)^10
= 1915.51
If the first payment is at month 12, make the appropriate changes.

math  jule, Thursday, August 9, 2012 at 8:53pm
an ordinary annuity starting today with eight annual payments of $900
Answer This Question
Related Questions
 algebra  john borrowed $650 from credit union . interest rate is 7.9% , and ...
 buissness math  Determine the total in Dexter's account after the second month ...
 eng.Economic  Marvin borrows $2,500 from the Shady Dealings Loan Company. He is...
 Consumer math !!!! please check  Determine the total in Dexter's account after...
 Business Math  Terry has an 18month installment loan for $1,700 at 12% annual ...
 Math  4. Vanna has just financed the purchase of a home for $200 000. She ...
 Please Help me with a Finance  Loan problem  A company borrows $170000, which ...
 compund interest  Payments of $1800 and $2400 weere made on a $10,000 variable...
 math  Jennifer Rick went to Sunshine Bank to borrow $3,500 at a rate of 10¾%. ...
 Business Math  What is needed to repay the loan at the of month of an 18 month ...
More Related Questions