make regular equal payments to repay the loan. The payments will be semi-annual for 10 years with the first payment in 6 months. The interest rate on the loan is i(2) = 8%. When Jim receives Frank's payments, he immediately deposits them into a second fund. The
make regular equal payments to repay the loan. The payments will be semi-annual for 10 years with the first payment in 6 months. The interest rate on the loan is i(2) = 8%. When Jim receives Frank's payments, he immediately deposits them into a second fund. The
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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Question
Jim loans Frank $35,000 today. Frank agrees to make regular equal payments to repay the loan. The payments will be semi-annual for 10 years with the first
payment in 6 months. The interest rate on the loan is i(2) = 8%. When Jim receives
Frank's payments, he immediately deposits them into a second fund. The interest
rate earned on the second fund is i(2) = 7%. After 10 years Jim cashes in his second
investment. Calculate the final yield rate earned by Jim on his initial $35,000 investment.
Note:-
- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
- Answer completely.
- You will get up vote for sure.
Expert Solution
Step 1: Define= Loan payment
Loans are paid by by equal periodic payments that carry the payment of interest and payment of principal loans amount also but these are fixed payments.
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