Scott takes out a college loan today of $5,000 at 4.5% per year. Scott is expected to make 20 annual payments of $X at the end of each year to repay the loan, starting a year from today. But starting with the sixth payment, Scott can only pay one - quarter of $X at the end of each year. This goes on for 10 payments. The bank agrees to accumulate the unpaid balance at 4.5%. After making the 10 reduced payments, the loan is renegotiated with the bank. Calculate the revised level payment $P that will yield the bank 1% per year over the remaining 5 years of the term of the original loan.
Scott takes out a college loan today of $5,000 at 4.5% per year. Scott is expected to make 20 annual payments of $X at the end of each year to repay the loan, starting a year from today. But starting with the sixth payment, Scott can only pay one - quarter of $X at the end of each year. This goes on for 10 payments. The bank agrees to accumulate the unpaid balance at 4.5%. After making the 10 reduced payments, the loan is renegotiated with the bank. Calculate the revised level payment $P that will yield the bank 1% per year over the remaining 5 years of the term of the original loan.
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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Transcribed Image Text:Scott takes out a college loan today of $5,000 at 4.5%
per year. Scott is expected to make 20 annual payments
of $X at the end of each year to repay the loan, starting
a year from today. But starting with the sixth payment,
Scott can only pay one - quarter of $X at the end of
each year. This goes on for 10 payments. The bank
agrees to accumulate the unpaid balance at 4.5%.
After making the 10 reduced payments, the loan is
renegotiated with the bank. Calculate the revised level
payment $P that will yield the bank 1% per year over the
remaining 5 years of the term of the original loan.
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