A person has a 10-year contract to receive a base salary of $25,000 a year and an increase of 5% every year starting from the second year. The person purchases a luxury item now for $43,000. The interest rate is 4% per year and the person would like to arrange a 10-year loan such that an equal (maximal) amount of money will be available for consumption in each of the next 10 years. Calculate the amount to be borrowed and the amount paid back each year.

Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
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A person has a 10-year contract to
receive a base salary of $25,000 a
year and an increase of 5% every
year starting from the second year.
The person purchases a luxury item
now for $43,000. The interest rate is
4% per year and the person would
like to arrange a 10-year loan such
that an equal (maximal) amount of
money will be available for
consumption in each of the next 10
years. Calculate the amount to be
borrowed and the amount paid
back each year.
Transcribed Image Text:A person has a 10-year contract to receive a base salary of $25,000 a year and an increase of 5% every year starting from the second year. The person purchases a luxury item now for $43,000. The interest rate is 4% per year and the person would like to arrange a 10-year loan such that an equal (maximal) amount of money will be available for consumption in each of the next 10 years. Calculate the amount to be borrowed and the amount paid back each year.
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