You have an outstanding loan currently. The bank requires you to pay in three installments at the end of each of the next three years the amount of which will be $1000. You had a good credit history and your bank has offered you that in case you have difficulty paying, you can skip making the next two payments but in that case you have to make a large payment at the end of the loans maturity date. If the interest rate is 5% what final payment will be necessary so that you can be indifferent between the two options?
You have an outstanding loan currently. The bank requires you to pay in three installments at the end of each of the next three years the amount of which will be $1000. You had a good credit history and your bank has offered you that in case you have difficulty paying, you can skip making the next two payments but in that case you have to make a large payment at the end of the loans maturity date. If the interest rate is 5% what final payment will be necessary so that you can be indifferent between the two options?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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You have an outstanding loan currently. The bank requires you to pay in three installments at the
end of each of the next three years the amount of which will be $1000. You had a good credit history and
your bank has offered you that in case you have difficulty paying, you can skip making the next two
payments but in that case you have to make a large payment at the end of the loans maturity date. If the
interest rate is 5% what final payment will be necessary so that you can be indifferent between the two
options?
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