A $5,000 short-term loan was received on September 3rd 2021. This loan is scheduled to be repaid as nine uniform weekly payments. A grace period is granted for 5 weeks during which no repayments are required. The first repayment took place on October 15th and should continue for 8 more weekly payments. a] Create a cash flow diagram of the loan showing both the money received as loan and, in symbols, money paid back to the lender (R/week). b] What is the weekly payment if the contract says that the nominal interest rate on this loan is 30% compounded daily? In this part, please assume that the 5-week grace period is interest-free. That is, the value of time during the grace period is zero. Starting from October 8ü midnight, the time value of money follows the contract. c] How much would the weekly payment be had the grace period not been interest free? That is, imagine now that time value of money follows the contract from September 3rd.
A $5,000 short-term loan was received on September 3rd 2021. This loan is scheduled to be repaid as nine uniform weekly payments. A grace period is granted for 5 weeks during which no repayments are required. The first repayment took place on October 15th and should continue for 8 more weekly payments. a] Create a cash flow diagram of the loan showing both the money received as loan and, in symbols, money paid back to the lender (R/week). b] What is the weekly payment if the contract says that the nominal interest rate on this loan is 30% compounded daily? In this part, please assume that the 5-week grace period is interest-free. That is, the value of time during the grace period is zero. Starting from October 8ü midnight, the time value of money follows the contract. c] How much would the weekly payment be had the grace period not been interest free? That is, imagine now that time value of money follows the contract from September 3rd.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![A $5,000 short-term loan was received on September 3rd 2021. This loan is scheduled to be repaid as nine
uniform weekly payments. A grace period is granted for 5 weeks during which no repayments are
required. The first repayment took place on October 15th and should continue for 8 more weekly
payments.
a] Create a cash flow diagram of the loan showing both the money received as loan and, in symbols,
money paid back to the lender (R/week).
b] What is the weekly payment if the contract says that the nominal interest rate on this loan is 30%
compounded daily? In this part, please assume that the 5-week grace period is interest-free. That is, the
value of time during the grace period is zero. Starting from October 8t# midnight, the time value of money
follows the contract.
c] How much would the weekly payment be had the grace period not been interest free? That is, imagine
now that time value of money follows the contract from September 3rd.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F80bd86dd-9db3-4b56-b165-b87e9d161749%2F100d6518-9d1f-4ebb-a0ff-a60b9add7b98%2Fjg4se6_processed.png&w=3840&q=75)
Transcribed Image Text:A $5,000 short-term loan was received on September 3rd 2021. This loan is scheduled to be repaid as nine
uniform weekly payments. A grace period is granted for 5 weeks during which no repayments are
required. The first repayment took place on October 15th and should continue for 8 more weekly
payments.
a] Create a cash flow diagram of the loan showing both the money received as loan and, in symbols,
money paid back to the lender (R/week).
b] What is the weekly payment if the contract says that the nominal interest rate on this loan is 30%
compounded daily? In this part, please assume that the 5-week grace period is interest-free. That is, the
value of time during the grace period is zero. Starting from October 8t# midnight, the time value of money
follows the contract.
c] How much would the weekly payment be had the grace period not been interest free? That is, imagine
now that time value of money follows the contract from September 3rd.
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VIEWPart (a) Cash flow diagram of the loan showing both the money received and paid is shown below:-
VIEWPart (b) Calculation of the weekly payment as the 5 week grace period is interest-free is as follow
VIEWPart (c) Calculation of the weekly payment be had the grace period not been interest free is:-
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