Dan borrowed $994.00 today and is to repay the loan in two equal payments. The first payment is in five months, and the second payment is in ten months. If interest is 7% per annum on the loan, what is the size of the equal payments? Use today as the focal date.

Dan borrowed $994.00 today and is to repay the loan in two equal payments. The first payment is in five months, and the second payment is in ten months. If interest is 7% per annum on the loan, what is the size of the equal payments? Use today as the focal date.

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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Concept explainers

Amortized Loans

The term "amortization" refers to spreading the value of a loan or a debt over a series of regular payments or installments comprising of both the principal and interest amount. It generally involves the process where in the value of a loan or an intangible asset is written down over its maturity period.

Question

Dan borrowed $994.00 today and is to repay the loan in two equal payments. The first payment is in five months, and
the second payment is in ten months. If interest is 7% per annum on the loan, what is the size of the
equal payments? Use today as the focal date.
The size of the equal payments is $.
(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places
as needed.)

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