math

posted by .

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 -

    Make a time-line 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 -

    an ordinary annuity starting today with eight annual payments of $900

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Business Math

    Terry has an 18-month installment loan for $1,700 at 12% annual interest. Interest is compunded using the Rule of 78. Terry decides to pay back the loan at the end of the first month. 1. What is the total finance charge on the loan?
  2. compund interest

    Payments of $1800 and $2400 weere made on a $10,000 variable-rate loan 18 and 30 months after the date of the loan. The interest rate was 11.5% compounded semi-annually for the first two years and 10.74% compounded monthly thereafter. …
  3. Math

    4. Vanna has just financed the purchase of a home for $200 000. She agreed to repay the loan by making equal monthly blended payments of $3000 each at 9%/a, compounded monthly. c. How long will it take to repay the loan?
  4. buissness math

    Determine the total in Dexter's account after the second month using the information below. Dexter Banler's account Principal: $1,604 Rate: 10% compound Length of period: month $3208.00 $1764.40 $1630.85 3. Ray Sugar's account Principal: …
  5. algebra

    john borrowed $650 from credit union . interest rate is 7.9% , and takes loan for 6 months . what will be his monthly payment to repay loan plus interest ?
  6. Consumer math !!!! please check

    Determine the total in Dexter's account after the second month using the information below. Dexter Banler's account Principal: $1,604 Rate: 10% compound Length of period: month >$3208.00 $1764.40 $1630.85 3. Ray Sugar's account …
  7. math

    Jennifer Rick went to Sunshine Bank to borrow $3,500 at a rate of 10¾%. The date of the loan was September 7. Jennifer hoped to repay the loan on January 15. Assume the loan is calculated using ordinary interest. How much will Jennifer …
  8. eng.Economic

    Marvin borrows $2,500 from the Shady Dealings Loan Company. He is told the interest rate is merely 2%/month and his payment is computed as follows: Loan period = 30 month Interest = 30(0.02)($2,500) = $1,500 Credit investigation and …
  9. Please Help me with a Finance - Loan problem

    A company borrows $170000, which will be paid back to the lender in one payment at the end of 5 years. The company agrees to pay monthly interest payments at the nominal annual rate of 7% compounded monthly. At the same time the company …
  10. Maths

    a loan of 2000 is being amortized over 48 months at a interest rate of 12 peecent compounded monthly, the outstanding loan at the beginning of 36 month is ?

More Similar Questions