A bank is negotiating a loan. The loan can either be paid off as a lump sum of $140,000 at the end of five years, or as equal annual payments at the end of each of the next five years. If the interest rate on the loan is 10%, what annual payments should be made so that both forms of payment are equivalent?
A bank is negotiating a loan. The loan can either be paid off as a lump sum of $140,000 at the end of five years, or as equal annual payments at the end of each of the next five years. If the interest rate on the loan is 10%, what annual payments should be made so that both forms of payment are equivalent?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A bank is negotiating a loan. The loan can either be paid off as a lump sum of
$140,000
at the end of
five
years, or as equal annual payments at the end of each of the next
five
years. If the interest rate on the loan is
10%,
what annual payments should be made so that both forms of payment are equivalent?Expert Solution
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