Suppose that you borrow a loan of amount P from a bank at the end of month 3 and make the monthly deposits to the bank as in the cash flow diagram below. In the following cash flow diagram A7=A8=A9=1000, and starting with A10, deposits start decreasing in the amount of 40. However, due to a cash problem, you miss a payment at month 12 but continue with your original payment plan thereafter (that is, A10=960, A11=920, A12=0, A13=840 etc). With these payments, your dept to the bank will be 0 at the end of month 20. Assuming that the interest rate is 12% compounded monthly. 1-Find out the initial loan amount P. 2-Find the total interest paid to the bank
Suppose that you borrow a loan of amount P from a bank at the end of month 3 and make the monthly deposits to the bank as in the cash flow diagram below. In the following cash flow diagram A7=A8=A9=1000, and starting with A10, deposits start decreasing in the amount of 40. However, due to a cash problem, you miss a payment at month 12 but continue with your original payment plan thereafter (that is, A10=960, A11=920, A12=0, A13=840 etc). With these payments, your dept to the bank will be 0 at the end of month 20. Assuming that the interest rate is 12% compounded monthly. 1-Find out the initial loan amount P. 2-Find the total interest paid to the bank
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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Suppose that you borrow a loan of amount P from a bank at the end of month 3 and make the monthly deposits to the bank as in the cash flow diagram below. In the following cash flow diagram A7=A8=A9=1000, and starting with A10, deposits start decreasing in the amount of 40. However, due to a cash problem, you miss a payment at month 12 but continue with your original payment plan thereafter (that is, A10=960, A11=920, A12=0, A13=840 etc). With these payments, your dept to the bank will be 0 at the end of month 20. Assuming that the interest rate is 12% compounded monthly.
1-Find out the initial loan amount P.
2-Find the total interest paid to the bank
Transcribed Image Text:P
Missing payment
months
+
5 7 8 9 10
20
11 12 13
.......
3.
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